A recent California case demonstrates that a class action that should never have been brought can still bounce around the court system for years. Starbucks Corp. v. Superior Court.pdf (Cal. App. 4th Dist., Apr. 25, 2011). For reasons that will become apparent shortly, we are going to call the most recent opinion “Starbucks II.”
During the 1970’s, California enacted legislation requiring the destruction of minor marijuana convictions that were more than two years old. The same law prohibited employers from asking about such convictions in employment applications, and prescribed monetary penalties if they did so. In Starbucks Corp. v. Superior Court, 168 Cal. App. 4th 1436 (2008) (“Starbucks I”), the plaintiffs contended that Starbucks violated this California law over 100,000 times because its pre-printed employment applications allegedly inquired into those convictions. They sought $26 million in statutory damages for these purported violations. The trial court certified a class of all California Starbucks applicants since 2004. It held that class members without convictions could still recover each. Those with covered convictions could opt out and potentially recover more. Starbucks appealed.
In Starbucks I, the court of appeals reversed, finding that those who had no convictions were not entitled to relief under the statute. Further, as none of the named plaintiffs actually had any marijuana convictions covered by the statute, the court held that none of them had standing to pursue any such claims. As the court commented, a contrary view would have recreated a “veritable financial bonanza for litigants like plaintiffs who had no fear of stigmatizing marijuana convictions.”
Despite the dismissal of the plaintiffs’ claims, the case did not end. Instead, the trial court permitted the plaintiffs to amend their complaint and, more importantly, to conduct further discovery to find a “suitable class representative.” The case was now a so-called “headless” class in that there were no named plaintiffs, but somehow the litigation was permitted to continue.
The trial court’s order permitting discovery was bad enough, but the court went even further, and ordered Starbucks to search its own records to find 25 applicants who had covered convictions and, further still, to disclose those names to “class counsel” with a potential for opt-out. Following additional procedural wrangling, Starbucks appealed again.
The court of appeals appears from the language of the opinion to have been incredulous. It expressed surprise that the case was still being litigated and noted that the discovery order itself likely violated both the spirit and language of the statute. It described the amount sought by the plaintiffs as “excessive.” It declined to create a per se rule against discovery orders in headless class cases, as some federal courts had done, but found no reason to do so in the case before it. Unfortunately, while the court questioned whether any viable class could ever be identified, it limited its holding to the discovery order, leaving the door open to the litigation continuing after the second remand.
The Bottom Line: In most cases a “headless” class should be dismissed, but some courts will permit such cases to continue for years while the would-be class counsel tries to find a suitable representative plaintiff.