"Opt-In" Requirement Nixed for Absent Class Members

June 6, 2005

California's public policy encourages resolution of mass tort disputes through the class action mechanism. Because class actions serve to vindicate the rights of numerous absent class members, the class action procedure raises significant due process issues.

Under the Due Process Clause of the 14th Amendment to the U.S. Constitution, absent class members must receive reasonable notice and an opportunity to be heard in order to be bound by a class action judgment. See California Rule of Court 1856; Federal Rule of Civil Procedure 23(c)(2). This notice must detail the nature and scope of the class action proceedings, and absent class members must be given the right to object, appear through counsel and to "opt-out" of the class and proceed independently.

In the class action context, however, due process is often tempered by considerations of policy and practicality. Indeed, reasonable notice does not require actual, personal notice in all circumstances. Rather, "if personal notification is unreasonably expensive or ... it appears that all members of the class cannot be notified personally," the court may direct the named litigants to provide only the best notice practicable under the circumstances, reasonably calculated to apprise the class members of the pendency of the action. See California Rule of Court 1856(e); Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950).

For example, reasonable notice may be effectuated by publication in a newspaper or magazine, or broadcasting on television, radio or the Internet. See California Rule of Court 1856(e).

This tension between due process and the fundamental policies underlying the class action mechanism in California came to a head in a recent decision of first impression and Constitutional dimensions. See Hypertouch Inc. v. Superior Court of San Mateo County, 2005 DJDAR 5174.

In Hypertouch, the Court of Appeal for the first time construed California Rule of Court 1856(e) as meaning that absent class members cannot be required to affirmatively "opt-in" to a class action prior to a determination of the defendant's liability. The court reasoned that an "opt-in" requirement is offensive to California's class action statutes and not required by due process.

Hypertouch involved a class action brought by Hypertouch Inc. alleging that defendant Perry Johnson Inc. violated the Telephone Consumer Protection Act of 1991, 47 U.S.C. Section 227(b)(1)(C) and California's Unfair Competition Law by sending mass unsolicited advertisements to telephone facsimile machines. After two years of contentious discovery, the court certified a class consisting of all people and entities that had received unsolicited facsimile advertisements from Perry Johnson.

Hypertouch then moved for an order approving notice to the class by way of first-class mail for about 45,000 to 68,000 known class members and by publication as to others. The proposed notice advised class members of, inter alia, the opportunity to "opt-out" of the litigation and proceed individually.

Hypertouch argued that personal notice to all class members was impracticable because Perry Johnson had first blocked disclosure of these records by successfully asserting the trade secret privilege and then destroyed a database containing the identity of thousands of class members.

Concluding that "[t]he stake of individual members is substantial and personal notification is necessary," the trial court held that plaintiff's proposed notice by publication did not satisfy due process requirements. The court attempted to solve this perceived problem by ordering notice by publication but requiring class members who wished to be included to affirmatively "opt-in" to the class. It reasoned that the affirmative act of "opting in" would confirm receipt of the actual notice the court deemed was constitutionally necessary.

Finding reversible error, a divided panel of the 1st District Court of Appeal granted the plaintiff's petition for writ review and ordered the trial court to vacate its order requiring class members to affirmatively "opt-in" to the class. In first deciding that the "opt-in" requirement was not mandated by due process, the court rejected the trial court's theory that members of the class holding a "substantial stake" could not constitutionally be bound by the judgment unless they received actual notice and affirmatively opted-in.

The court reviewed at length U.S. Supreme Court precedent holding that "opt-out" procedures meet due process irrespective of the size of the claim involved. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985). It reasoned that Shutts repudiates the view that class members with a substantial stake have greater due process rights.

Adopting the "opt-in" procedure, the court noted, "would invalidate Rule 23(c)(2)," which specifically codifies the "opt-out" mechanism.

The court also opined that such an approach would undermine the policies underlying the class action device of maximizing judicial efficiency while providing redress to claimants that would not otherwise have access to the courts. For example, requiring plaintiffs to affirmatively "opt in" would "inevitably and sometimes significantly" reduce the size of the class, and may therefore be seen as simply "another device by which a defendant could chip away at the size of the class through exclusion of unnamed plaintiffs." See Carlson v. Superior Court, 33 Cal.App.3d 640 (1973).

This approach may thus freeze out the meritorious claims of absent class members who, for one reason or another ("ignorance, timidity, or unfamiliarity"), simply will not take the affirmative step of opting-in.

On the other hand, reducing the class to those who acknowledge receipt of actual notice by "opting in" may prejudice defendants by limiting the res judicata effect of a judgment while opening the door to a great deal of redundant litigation.

Fearing that "[T]he whole concept of a large class-action might easily be stultified by insistence upon perfection in actual notice to class-members," the Hypertouch court cautioned that "courts should not be deterred from Rule 23 economies in litigation by exaggerating the presumed requirements of due process, or by the specter of an occasional successful collateral attack on the basis of due process."

The court next reasoned that an "opt-in" procedure conflicts with California class action rules, which are codified at Civil Code Section 1781 and California Rules of Court 1850-1861. The court explained that, consistent with Federal Rule of Civil Procedure 23 and Civil Code Section 1781, Rule 1856(a) specifically contemplates that personal notice may not be possible in certain circumstances. Where that is the case, due process only requires notice reasonably calculated to apprise the class members of the pendency of the action. Therefore, the court concluded, Rule 1856(e) cannot reasonably be construed as permitting the use of an "opt-in" requirement as a means of providing the actual notice the rule was designed to make unnecessary. As such, the court opined, it is irrelevant that Rule 1856(a) does not specifically prohibit the "opt-in" approach.

Turning again to policy, the court explained that its holding is consistent with the purpose of Rule 1856(e), which "must be liberally construed" with a view to enhancing the use of class actions as a means of upholding the rights of absent class members who are unable to personally prosecute an action. The class action, which is proper only when joinder of all members of the class is impracticable, was designed to eliminate the need to join absent parties.

Yet an "opt-in" requirement, the court explained, would undermine the integrity of the class action in California process by creating an improper form of permissive joinder.

The Hypertouch decision confirms that due process and public policy are coexisting well in California jurisprudence. In the class action context, however, it appears that due process must give way to public policy, if ever so slightly.

Many salutary reasons justify this result. Indeed, Hypertouch proves that an "opt-in" requirement would drastically reduce the number of absent class members benefiting from the class action mechanism - out of more than 100,000 estimated class members in that case, only 55 actually "opted-in."

Further, the "opt-in" procedure does not increase the likelihood members of the class will actually receive notice. Yet it increases the likelihood of redundant litigation because it invariably decreases the number of class members bound by the judgment. As such, Hypertouch protects the integrity of the class action device while preserving the rights of silent masses lacking meaningful access to the courts.

It remains to be seen whether the constitutional issues raised in Hypertouch warrant its review in the California or U.S. Supreme Courts. In the meantime, however, Hypertouch provides a bright line rule on the strictures of due process in the class action context.

The articles on our website include some of the publications and papers authored by our attorneys, both before and after they joined our firm. The content of these articles should not be taken as legal advice. The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views or official position of Robins Kaplan LLP.


David Martinez


Member of the Executive Board;
Member of the Firm's Diversity Committee;
Pro Bono Chair, Los Angeles Office

Jennifer Vargas

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