Marler v. E. M. Johansing: Court of Appeal Reverses Class Certification Denial

In a published opinion, California’s Second Appellate District has circumscribed the boundaries of trial court discretion in denying class certification where there is an allegation of class-wide reliance on a material misrepresentation.  See Marler v. E. M. Johansing, LLC, No. B229445, 2011 Cal. App. LEXIS 1314 (Cal. Ct. App. Oct. 19, 2011) (available here).

The plaintiffs, elderly mobile home park residents, alleged that the defendant developer made material misrepresentations about a condominium conversion proposal, suggesting that the lots would be priced between $110,000 and $150,000 for purchase by the residents.  See id. at *1-2, 4-5.  Based on these representations, the residents voted to approve the conversion; however, the defendant subsequently notified the residents that the purchase prices would be substantially greater than previously stated: $198,000 to $240,000.  Id. at *6. 

The trial court denied the plaintiffs’ class certification motion, finding that the class was not ascertainable and lacked the requisite community of interest.  Id. at *9.  The Court of Appeal reversed, holding that the certification analysis was not a particularly close call, and that the trial court’s legal analysis was flawed.  See id. at *10-11.

In analyzing the class’ ascertainability, the Court of Appeal concurred with the trial court that the class definition was overbroad and potentially confusing.  However, the unanimous three-judge panel concluded that denying certification was not the proper response to overbreadth.  Rather, “[o]verbreadth may be cured by modifying the class definitions.”  Id. at *15.  Striking a pragmatic note, the Marler court added that “[b]ecause there is an identifiable class, plaintiffs’ rights should not be forfeited because of counsel’s choice of words in the complaint or class certification motion.”  Id. at *16-17.

 As to the community of interest issue, the Court of Appeal found fault with the trial court’s denial of certification based on variances in individual damages, contrary to long-established class action jurisprudence to the effect that different damages among class members does not preclude certification.  See id. at *18-19 (citing Sav-On Drug Stores, Inc. v. Super. Ct., 34 Cal. 4th 319, 334 (2004)).  The Court of Appeal also rejected the trial court’s position that individual proof was needed to show reliance on the defendants’ allegedly fraudulent statements.  Instead, the Marler panel underscored that where fraud is alleged, class-wide reliance may be inferred when a misrepresentation is shown to be material.  See id. at *20-21.