Opinion
D071597
05-14-2018
In re CIPRO CASES I & II
Bandas Law Firm, Robert W. Clore; Lang Hanigan & Carvalho and Timothy R. Hanigan for Objector and Appellant Sean Hull. C. Benjamin Nutley; Law Office of John W. Davis and John W. Davis for Objectors and Appellants Sarah McDonald and Steven Helfand. Edleson & Rezzo, Joann F. Rezzo; Karcher Harmes and Kathryn E. Karcher for Defendants and Respondents. Lieff, Cabraser, Heimann & Bernstein, Eric B. Fastiff, Richard M. Heimann, Lin Y. Chan, Michelle A. Lamy; Zwerling, Schachter & Zwerling, Dan Drachler; Joseph Saveri Law Firm, Joseph R. Saveri, Joshua P. Davis, Ryan J. McEwan and Kyla J. Gibboney for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. Nos. JCCP 4154, JCCP 4220) APPEAL from a judgment of the Superior Court of San Diego County, Ronald L. Styn, Judge. Appeal dismissed. Bandas Law Firm, Robert W. Clore; Lang Hanigan & Carvalho and Timothy R. Hanigan for Objector and Appellant Sean Hull. C. Benjamin Nutley; Law Office of John W. Davis and John W. Davis for Objectors and Appellants Sarah McDonald and Steven Helfand. Edleson & Rezzo, Joann F. Rezzo; Karcher Harmes and Kathryn E. Karcher for Defendants and Respondents. Lieff, Cabraser, Heimann & Bernstein, Eric B. Fastiff, Richard M. Heimann, Lin Y. Chan, Michelle A. Lamy; Zwerling, Schachter & Zwerling, Dan Drachler; Joseph Saveri Law Firm, Joseph R. Saveri, Joshua P. Davis, Ryan J. McEwan and Kyla J. Gibboney for Plaintiffs and Respondents.
I.
INTRODUCTION
Objectors Sean Hull, Sarah McDonald and Steven Helfand brought two appeals pertaining to a partial class action settlement between the plaintiffs and certain defendants in the underlying proceeding. During the pendency of the appeals, the Supreme Court issued its opinion in Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260 (Hernandez), in which the Court relied on longstanding Supreme Court precedent to reaffirm that unnamed class members may not appeal from a class judgment, settlement or attorney fee award unless those members have become parties to the action by formal intervention or filing a motion to vacate the judgment. After the opinion in Hernandez was filed, the plaintiffs filed a motion to dismiss the objectors' appeals, on the ground that none of the objectors had become parties to the action by intervening or filing a motion to vacate the judgment. The defendants joined in the plaintiffs' motion.
McDonald and Helfand voluntarily moved to dismiss their appeal, but Hull filed an opposition to the motion to dismiss. After considering the parties' arguments with respect to the plaintiffs' and defendants' joint motion to dismiss, we conclude that Hull's appeal must be dismissed.
II.
FACTUAL AND PROCEDURAL BACKGROUND
In the underlying action, the plaintiff class challenged settlement agreements that were reached in a patent infringement case between the maker of Cipro and companies that sought to market and sell a generic version of Cipro. (See In re Ciprofloxacin Hydrochloride Antitrust Litig. (E.D.N.Y. 2005) 363 F.Supp.2d 514, 518.) The plaintiffs argued that the settlement agreements between the pharmaceutical companies amounted to unlawful restraints of trade in violation of the Cartwright Act and the Unfair Competition Law. (In re Cipro Cases I & II (2015) 61 Cal.4th 116.)
For ease of discussion, we will use "the plaintiffs" to refer to the plaintiff class.
The plaintiffs ultimately settled the case in a series of three settlements with different pharmaceutical defendants. This appeal concerns a 2016 $100 million settlement between the plaintiffs and defendants Hoescht Marion Roussel, Inc. (HMR), The Rugby Group, Inc., and Watson Laboratories, Inc. (the HMR settlement).
Prior relevant proceedings
In late 2003, after the cases were removed to federal court and remanded to the San Diego Superior Court, the superior court granted the plaintiffs' motion for certification of a class of "hundreds of thousands" of California consumers and third-party payors who had purchased Cipro. On appeal, this court narrowed the proposed class and affirmed the certification of the class as modified. (In re Cipro Cases I & II (2004) 121 Cal.App.4th 402.) In 2004, after affirmance of the class certification ruling on appeal, the trial court issued an order regarding class notice, which included an opportunity for class members to opt out.
In August 2016, the parties entered into the HMR settlement agreement. The trial court granted preliminary approval of the HMR settlement and directed that notice be distributed to class members. The notice described the terms of the settlement and apprised class members of their rights with respect to the settlement. Five class members, including Hull, filed objections to the HMR settlement. None of the objectors moved to intervene in the action.
For context, the class comprised hundreds of thousands of individuals.
On October 7, 2016, the court held a final approval hearing with respect to the HMR settlement. One of the other objectors attended the hearing by telephone, but neither Hull nor his counsel attended.
On November 4, 2016, the trial court overruled the five objections to the settlement and granted final approval. After entering judgment, the court awarded attorney fees, costs, a litigation advance, and incentive awards.
Hull did not move to vacate the judgment. However, Hull, and McDonald and Helfand, filed notices of appeal from the trial court's judgment and postjudgment order regarding fees and costs.
On January 29, 2018, the Supreme Court issued its opinion in Hernandez, reaffirming the holding in Eggert v. Pac. States S. & L. Co. (1942) 20 Cal.2d 199 (Eggert) that unnamed class members may not appeal from a judgment, settlement or attorney fee award in a class action unless they have become parties to the action. A few days after the parties had completed their briefing in the appeals in this matter, the plaintiffs filed a motion to dismiss the objectors' appeals, based on the holding in Hernandez. Soon thereafter, the defendants joined in the motion to dismiss.
In response, McDonald and Helfand requested that their appeal be dismissed. This court granted their request for dismissal, leaving Hull as the sole remaining objector with a pending appeal. Hull filed a brief opposing the motion to dismiss his appeal. We permitted the plaintiffs and defendants to file a reply to Hull's opposition.
III.
DISCUSSION
Code of Civil Procedure section 902 establishes that " '[a]ny party aggrieved' may appeal." On January 29, 2018, the Supreme Court issued its opinion in Hernandez, affirming the appellate court's determination that unnamed class members "may not appeal a class judgment, settlement, or attorney fees award unless they intervene in the action." (Hernandez, supra, 4 Cal.5th at p. 263.) Specifically, the Hernandez court confirmed that the rule announced in Eggert, supra, 20 Cal.2d 199 remains the rule in California and requires that a class settlement objector have become a party of record in a class action, either by formally intervening in the action or by filing a motion to vacate the judgment, in order to have standing to appeal.
Although the Supreme Court specifically references the objector's failure to "intervene in the action" in this statement from the introduction in Hernandez, it appears that the Supreme Court was using the term "intervene" as shorthand for "become a party of record." As we explain in the text, it is clear from the later discussion in Hernandez that the relevant question for purposes of determining whether an unnamed class member has standing to appeal is whether that class member became a party of record in the trial proceedings. (See Hernandez, supra, 4 Cal.5th at p. 263.) --------
In Eggert, the Supreme Court held that unnamed class members lack standing to appeal because they are not "parties" pursuant to Code of Civil Procedure section 902. (Eggert, supra, 20 Cal.2d at p. 201.) "[O]nly a party to the record can appeal." (Ibid.) An unnamed class member can become a party of record through one of two means: (a) the unnamed class member can formally intervene, or (b) the unnamed class member can file a motion to vacate the class judgment. (Hernandez, supra, 4 Cal.5th at p. 267; see also Eggert, at p. 201.)
There is no dispute that Hull neither formally intervened in the action nor moved to vacate the class judgment. Thus, under Eggert and Hernandez, he is not a party of record and therefore lacks standing to appeal from the judgment and postjudgment order in this case.
Hull argues that Hernandez does not require that his appeal be dismissed. According to Hull, Hernandez is limited to appeals from judgments after a trial on the merits, and should not apply to the settlement of a class action, where a formal objection procedure exists for class members. Hull further contends that even if Hernandez does apply to this case, "the facts here trigger an exception to the general rule of retrospective application of authority from the California Supreme Court," because applying Hernandez would be unfair in this situation. Finally, Hull argues that if this court determines that Hernandez does apply such that he was required to have become a party of record in order to have standing to appeal, then the class notice violates standards of due process because it failed to inform him of the requirement that he intervene in order to have standing to appeal. We find no merit in these arguments.
First, it is abundantly clear from the language of Hernandez that the Eggert rule applies not only to class action judgments entered after a trial, but also to settlements and attorney fee awards in class actions. Specifically, the Hernandez court stated, "We conclude the Court of Appeal correctly relied on Eggert to hold that unnamed class members may not appeal a class judgment, settlement, or attorney fees award unless they intervene in the action." (Hernandez, supra, 4 Cal.5th at p. 263, italics added.) Further, the Hernandez court expressly addressed the objector's argument that the Eggert rule should not apply to class action settlements:
"Muller alternatively claims that because a class settlement is generally binding on all class members (assuming class representatives have complied with due process regarding notice and adequate representation), we should create an exception to Eggert that allows members to appeal their denied objections to settlement without formal intervention. [Citation.] We decline to do so. Following Eggert and requiring intervention does not discourage unnamed class members from filing a meritorious appeal. Rather, it continues a manageable process under a bright-line rule that promotes judicial economy by providing clear notice of a timely intent to challenge the class representative's settlement action. Formal intervention also enables the trial court to review the motion to intervene in a timely manner. Muller had the opportunity to intervene in the trial court proceedings but chose not to do so. Instead, she made a strategic choice to wait and see if she agreed with the settlement amount and attorney fees agreement. By filing an appeal without first intervening in the action however, Muller never became an 'aggrieved party' of record to the action as our law requires. [Citations.]" (Hernandez, at p. 273.)
Hernandez thus clearly requires that an objector to a class action settlement have become a party of record in order to have standing to appeal.
Second, we reject Hull's suggestion that Hernandez should not be applied retroactively to this case because retroactive application would be unfair. Hull acknowledges that the "general rule is California Supreme Court opinions apply retroactively unless it would be unfair or application of the rule would violate public policy." He contends that application of Hernandez to this case would be unfair because he relied on appellate court opinions that misapplied (or, as Hernandez suggests, ignored) Eggert in holding that "unnamed class member objectors who informally object to settlement during fairness hearings" may appeal their overruled objections (Hernandez, supra, 4 Cal.5th 260 at p. 269), and because the settlement notice did not inform objecting class members that they must intervene in order to have standing to appeal.
"To determine whether a decision should be given retroactive effect, the California courts first undertake a threshold inquiry: does the decision establish a new rule of law? If it does, the new rule may or may not be retroactive . . . but if it does not, 'no question of retroactivity arises,' because there is no material change in the law. [Citations.] In that event the decision simply becomes part of the body of case law of this state, and under ordinary principles of stare decisis applies in all cases not yet final. 'As a rule, judicial decisions apply "retroactively." [Citation.] Indeed, a legal system based on precedent has a built-in presumption of retroactivity.' [Citation.]" (People v. Guerra (1984) 37 Cal.3d 385, 399 (Guerra).)
The main problem with Hull's argument against retroactive application of Hernandez is that Hernandez does not establish a new rule of law. Rather, Hernandez merely reaffirms and applies an already-established rule of law. As the Hernandez court explained, the rule requiring that one must be a party of record in order to have standing to appeal has been the rule in California for over 75 years, since Eggert. (Hernandez, supra, 4 Cal.5th at p. 272 ["As the Court of Appeal emphasized here, our Legislature has chosen to continue Eggert's rule despite changes in federal class action rules"] & p. 273 ["we conclude that Muller presents no persuasive reason for us to reconsider Eggert's rule, much less depart from it"].) Further, Hernandez did not expand or modify Eggert, such that Hernandez could be construed to constitute a new application of an old rule. Rather, Hernandez merely reaffirms the long-standing Eggert rule and applies it directly. Because Hernandez does not announce new law, it "simply becomes part of the body of case law of this state, and under ordinary principles of stare decisis applies in all cases not yet final." (Guerra, supra, 37 Cal.3d at p. 399.)
Finally, we reject Hull's contention that the class notice somehow violated "due process" because it failed to inform Hull that he would have to become a party of record in the action in order to appeal from the court's approval of the settlement. Hull complains that the HMR settlement agreement "affirmatively included a section on the requirements for objecting class members to appeal," and asserts that "[i]n addressing requirements for appeal, these documents included no discussion of intervening or moving to vacate judgment" and therefore "misstate[d] requirements to object or appeal from an objection."
Hull's argument suggests that a settlement notice or settlement agreement must include an "instruction that class members wishing to appeal must also intervene." However, he provides no authority for such a proposition, and we have found no basis for such a rule. Procedural due process requires that affected parties be provided with "the right to be heard at a meaningful time and in a meaningful manner." (In re Vitamin Cases (2003) 107 Cal.App.4th 820, 829.) To satisfy due process, notice provided to class members regarding a class settlement " ' "must fairly apprise the class members of the terms of the proposed compromise and of the options open to dissenting class members." ' " (Cho v. Seagate Technology Holdings, Inc. (2009) 177 Cal.App.4th 734, 746.) Under the California Rules of Court governing class actions, "notice of the final approval hearing must be given to the class members in the manner specified by the court. The notice must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement." (Cal. Rules of Court, rule 3.769(f).)
There is no contention that the HMR settlement notice failed to explain the settlement, or failed to provide a discussion of the process for objecting to the settlement, or that it omitted any other relevant information that is required to be included in the notice. In addition to describing the terms of the settlement and informing class members of their right to comment on, or object to, the settlement, the notice informed class members that additional information could be found on a website created for the settlement.
Although the HMR settlement agreement contained a provision pertaining to a requirement that any class member "that wishes to appeal the order and final judgment, which appeal will delay the distribution under the Settlement Agreement to the Class, . . . post a bond" with the court "as a condition of prosecuting such appeal," the settlement agreement does not set forth the procedures for initiating an appeal or for obtaining standing to appeal. The provision regarding the posting of a bond merely provides the defendants and the named class plaintiffs with some level of protection against a class member attempting to delay distribution of the settlement by pursuing an appeal. Neither the settlement agreement nor the settlement notice purports to set forth the requirements to file an appeal, and there is no requirement that they do so. Neither document misstates or misinforms class members regarding the requirements for objecting to the settlement or appealing from the court's overruling of such an objection. Hull's claim that the notice violated his right to due process by failing to inform him of the requirement that he become a party of record in order to have standing to appeal thus fails.
We conclude that because Hull never became a party of record, either by intervening or filing a motion to vacate the judgment, he has no standing to appeal from the judgment. His appeal must therefore be dismissed.
IV.
DISPOSITION
The appeal is dismissed.
AARON, J. WE CONCUR: BENKE, Acting P. J. GUERRERO, J.