Ellis v. Pacific Health: Absent Putative Class Members Not Bound By Collateral Estoppel

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California’ Second Appellate District has issued a ruling underscoring the fact that orders denying class certification do not operate, by collateral estoppel, to prevent those other than the named plaintiffs from filing a subsequent class action alleging the same claims.  See Ellis v. Pacific Health Corp., No. B229609 (Cal. Ct. App. Jul. 24, 2012) (order re appeal from judgment of dismissal) (available here).

Ellis usefully summarizes and affirms the controlling authorities, foremost Bridgeford v. Pacific Health Corp., 202 Cal. App. 4th 1034 (2012).  In Bridgeford, the court adopted the United States Supreme Court’s holding in Smith v. Bayer Corp., “[n]either a proposed class action nor a rejected class action may bind nonparties.”  131 S.Ct. 2368, 2380 (2011).  Ellis demonstrates that the Bridgeford holding (“unnamed putative class members of a class that was never certified cannot be bound by collateral estoppel”) is not an idle doctrine.  Bridgeford at 1037.  In Ellis, the trial court had sustained Pacific Health’s demurrer on the ground that the plaintiff was within the class definition of an earlier putative class action (Larner v. Pacific Health Corp.), which alleged the same claims against the same defendant.  However, as to the pivotal privity requirement for the application of collateral estoppel, the unanimous three-judge panel held that the plaintiff, as merely one among the many unnamed prospective class members, was neither a party to the prior action nor represented by a party to the prior action.  Order at 7.  The court explained that, while the named plaintiffs in Ellis had economic interests that were “substantially aligned with Larner’s,” the prior decision cannot bind them; since the Larner case was never certified, the Ellis plaintiffs could not have been parties to it. Id.