Death of the death knell doctrine?

Every appellate specialist knows a final judgment is the key that unlocks the door to the appellate realm. There are, however, a handful of statutory and common law exceptions to that immutable finality requirement, and one of the most well-established is the so-called "death knell" doctrine. That doctrine applies to orders, like the denial of class certification, that effectively end the litigation. See Daar v. Yellow Cab Co., 67 Cal. 2d 695, 699 (1967). Indeed, in the context of orders denying class certification, this exception to the final judgment requirement is so firmly entrenched that the failure to immediately appeal the order can result in the waiver of the right to appeal that ruling when the action concludes. See Stephen v. Enterprise Rent-A-Car, 235 Cal. App. 3d 806, 811 (1991).

The application of the death knell doctrine to class certification orders has its limits. Courts refuse to allow immediate appeals from orders that simply reduce the scope of the classwide claims or allow for partial certification. In re Baycol Cases I and II, 51 Cal. 4th 751, 757-58 (2011). But recently, a much more significant limitation has been recognized where classwide claims are dismissed but a claim providing for representative or collective relief remains. That was the fact pattern in Munoz v. Chipotle Mexican Grill Inc., 2015 DJDAR 7647 (Cal. App. 2nd Dist., June 30, 2015), where the court refused to allow an immediate appeal of an order denying class certification because a claim under the Private Attorneys General Act remained to be litigated. Since the PAGA claim prevented the death knell bell from ringing, Munoz bears close analysis for appellate specialists and class counsel alike.

In Munoz, former employees filed a putative class action lawsuit against Chipotle alleging six Labor Code violations. One class representative also sought civil penalties under the PAGA for each Labor Code cause of action on behalf of herself and as a representative of all "current and former employees." Plaintiffs moved for class certification, seeking to certify subclasses on all causes of action, except for the PAGA claims. Chipotle simultaneously moved to deny class certification and strike the class allegations. The trial court denied plaintiffs' motion for class certification entirely, finding a lack of predominance of common issues. Since their certification motion was denied, plaintiffs appealed.

While Munoz appeared to involve a classic death knell situation, Chipotle argued the appeal should be dismissed because the PAGA claim remained pending in the trial court. Under the PAGA, "aggrieved employees" serve as proxies of California's labor enforcement agencies to recover monetary penalties against employers engaging in Labor Code violations. Cal. Lab. Code Section 2699(i). Seventy-five percent of any penalties recovered are distributed to the Labor and Workforce Development Agency and the remaining 25 percent of penalties are recoverable by the aggrieved employees. Chipotle contended the PAGA claim provided the incentive to continue litigating to recover damages for all of the aggrieved employees. Because of that incentive, Chipotle likewise maintained that one of the principal rationales underlying the death knell doctrine - that the challenged ruling effectively ended the litigation - did not apply. Recognizing the issue as one of first impression, the Munoz court agreed with Chipotle and dismissed the appeal.

Critical to the court's rejection of the appeal was its observation that a plaintiff bringing a PAGA claim still would have "ample financial incentive" to continue the lawsuit despite the denial of class certification because of the expansive relief provided under the statute. Given that incentive, the court found that the ruling denying class certification did not have the practical effect of ending the litigation.

In adopting this death knell exception, the panel relied in part on Haro v. City of Rosemead, 174 Cal. App. 4th 1067, 1078 (2009). In Haro, the appellate court declined to apply the death knell doctrine to an aborted attempt to pursue a Fair Labor Standards Act action as a class action. Just as in the ordinary death knell situation, Haro involved an order denying class certification on the ground that an FLSA action could not be prosecuted as a class action. But, just as in Munoz, Haro refused to apply the death knell doctrine because in the court's view, the denial of class certification did not effectively end the litigation. Rather, the employee-plaintiffs remained free to pursue an opt-in collective FLSA action that could provide relief for individuals who would have been part of the class.

Munoz and Haro both refused to apply the death knell doctrine where a complaint included substantial non-class claims providing for representative or collective relief. That type of claim warranted a departure from the typical death knell situation, where an individual plaintiff would not find it economical to pursue his or her individual claims to final judgment. In re Baycol Case, 51 Cal. 4th at 757; Farwell v. Sunset Mesa Property Owners Ass'n Inc., 163 Cal. App. 4th 1545, 1552 (2008) (denial of class certification is the "death knell of the action itself"). Because the remaining claim was worth pursuing, neither Munoz nor Haro was willing to permit an immediate appeal of an order denying class certification. As a result, what previously looked like a bright-line rule has become opaque. All rulings denying class certification are not created equal where the death knell doctrine is concerned.

So what does this mean for class action litigators and the appellate specialists advising them? First, at the outset of a case, there should be an assessment on whether any of the non-class action claims could prevent the application of the death knell doctrine following denial of a class certification motion. Consistent with Munoz and Haro, such a claim likely would encompass representative or collective relief substantial enough to provide an incentive to continue litigating. But what about a significant individual claim that involves substantial damages but not representative or collective relief? Neither Munoz nor Haro provides specific guidance for that type of claim. The reasoning in both cases, nevertheless, suggests that no appeal would be allowed in that instance either because the incentive to continue litigating remains.

Second, if such a significant individual claim persists after the denial of class certification, there is a bit of a quandary. While Munoz and Haro adopted a limitation of the death knell doctrine where such a claim is involved, given the general rule, the risk of waiver of the right to appeal exists if an immediate appeal is not taken from the denial of class certification. There is no guarantee that other appellate courts will see the death knell issue the same way and the appeal could be waived if the order denying class certification is taken up after the individual claims are resolved.

Third, given this risk, counsel would be well-advised to file a petition for a writ of mandate, as well as an appeal, following the denial of a class certification motion, particularly if any representative or collective action claims remain. With an abundance of caution, the same options should be used where a significant individual claim also remains. These concurrent filings would at least provide an opportunity for discretionary review of the ruling denying class certification if the court of appeal rejects the appeal under the death knell doctrine.