Blue Chip Stamps v. Superior Court

556 P.2d 755, 18 Cal. 3d 381, 134 Cal. Rptr. 393

• Court: California Supreme Court
• Decided: November 30, 1976
• Docket: L.A. 30530
• Status: Published

Opinions

Opinion

CLARK, J.

Petitioners seek to compel respondent court to vacate its order certifying the class in Eleanor Botney v. Blue Chip Stamps and to dismiss the class action portion of the case. The class action must be dismissed.

Blue Chip sells trading stamps to merchants who in turn distribute them to customers. Between 1 March 1967 and 28 April 1970 the price for 1,200 stamps (a full book) ranged from $1.68 to $2.76 to the merchant. Blue Chip used several different price schedules, averaging $1.90 for each of the four years.

The merchants distributed the stamps to their customers at a rate of one stamp for each 10 cents of purchase, although some gave bonuses. When Blue Chip redeemed the stamps for merchandise, it charged sales tax reimbursement on the basis of $3 per book, the estimated retail value of the merchandise.¹

Blue Chip paid all tax reimbursements to the State Board of Equalization.

It is undisputed that a high percentage of California households—perhaps 95 percent—received Blue Chip stamps during the period. Between 50 and 60 million books were redeemed in 1969 and 1970. However, in recent years, redemptions have decreased to a fraction of those during the period in question.

On 1 March 1971, Eleanor Botney and Thelma Daar, represented by their attorney husbands, commenced an action on their own behalf and purportedly on behalf of persons similarly situated, seeking to recover the sales tax paid to Blue Chip. They also sought injunctive relief, punitive damages and attorney’s fees. Blue Chip cross-complained against the State Board of Equalization, seeking refund of sales taxes in an amount equal to any judgment rendered against it. Judith Taylor, a member of the purported class, intervened, objecting to the class action as being contrary to her interest, the public interest, and the interest of other class members similarly situated to her.

Partial summary judgment determined it was proper for Blue Chip to collect sales tax reimbursement but the amounts exceeded that permitted by State Board of Equalization regulation 1671. The court did not specify the excess but called for an accounting.

Respondent court subsequently granted plaintiffs’ motion to dispense with notice before trial. The court stated that records listing the members of the class are unavailable, that pretrial notice would have little practical effect, that notice “would require potential class members to search their memories and guess whether they had redeemed books of stamps during the pre-April 28, 1970 period covered by this case,” and that as “most of the class members have overpaid only very small sums, and some as little as 18 cents, the likelihood of such members taking the trouble to ‘opt out’ of the class is rather remote.” The court concluded that “depriving class members of the chance to ‘opt out’ by not having a pretrial publication of notice, would mean, as a practical matter, that the class would not be deprived of very much” and that this “small deprivation is better, on balance, than an ineffective and meaningless notice being published or posted.” The parties, although disputing the court’s conclusions, do not dispute the court’s statements as to the absence of records or the minimal amounts due each member of the purported class.²

Following an amendment to correct a defect in the complaint, respondent court certified the class.³

Resting on considerations of necessity and convenience, the class action attempts to further justice. (City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 458 [115 Cal.Rptr. 797, 525 P.2d 701]; Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 703-704 [63 Cal.Rptr. 724, 433 P.2d 732].) However, because group action is also capable of injustice, the representative plaintiff must show substantial benefit will result both to the litigants and to the court. (City of San Jose v. Superior Court, supra, 12 Cal.3d 447, 458-460; Collins v. Rocha (1972) 7 Cal.3d 232, 238 [102 Cal.Rptr. 1, 497 P.2d 225]; Vasquez v. Superior Court (1971) 4 Cal.3d 800, 811 [94 Cal.Rptr. 796, 484 P.2d 964, 53 A.L.R.3d 513].) As pointed out in City of San Jose, “despite this court’s general support of class actions, it has not been unmindful of the accompanying dangers of injustice or of the limited scope within which these suits serve beneficial purposes. Instead, it has consistently admonished trial courts to carefully weigh respective benefits and burdens and to allow maintenance of the class action only where substantial benefits accrue both to litigants and the courts. [Citations.] It has also urged that the same procedures facilitating proper class actions be used to prevent class suits where they prove nonbeneficial.” (12 Cal.3d at p. 459; fn. omitted.)

The class action has been held appropriate when numerous parties suffer injury of insufficient size to warrant individual action and when denial of class relief would result in unjust advantage to the wrongdoer. (Collins v. Rocha, supra, 7 Cal.3d 232, 237 et seq.; Vasquez v. Superior Court, supra, 4 Cal.3d 800, 807; Daar v. Yellow Cab Co., supra, 67 Cal.2d 695, 715.) A factor in determining feasibility of the group approach is the probability each member will come forward ultimately, identify himself and prove his. separate claim to a portion of the total recovery. (Daar v. Yellow Cab Co., supra, 67 Cal.2d 695, 706, 713.)

However, when potential recovery to the individual is small and when substantial time and expense would be consumed in distribution, the purported class member is unlikely to receive any appreciable benefit. The damage action being unmanageable and without substantial benefit to class members, it must then be dismissed. (In re Hotel Telephone Charges (9th Cir. 1974) 500 F.2d 86, 91-92 (potential recovery of $6 per class member); Devidian v. Automotive Service Dealers Assn. (1973) 35 Cal.App.3d 978, 986 [111 Cal.Rptr. 228] (most claims $10 or less); Stilson v. Reader’s Digest Assn., Inc. (1972) 28 Cal.App.3d 270, 273-274 [104 Cal.Rptr. 581] (millions of class members entitled to nominal damages).) And, when the individual’s interests are no longer served by group action, the principal—if not the sole—beneficiary then becomes the class action attorney. To allow this is “to sacrifice the goal for the going,” burdening if not abusing our crowded courts with actions lacking proper purpose. (See City of San Jose v. Superior Court, supra, 12 Cal.3d 447, 462.)

While termination of a defendant’s alleged wrongdoing is a factor to be considered (Daar v. Yellow Cab Co., supra, 67 Cal.2d 695, 715), it does not warrant group action for damage when the members will not' recover damage, and when a simpler remedy such as mandate is available. Moreover, when as here, the assertedly wrongful practice has ended long before the action is filed, its requested termination is a rather empty prayer.

Here, in proposing methods of recovery to the class, the lawyers suggest payment of claims either by cash upon informal presentation or by “fluid recovery,” repayment of excess tax collections by reducing future charges. However, the proof of claim requirement established by Daar v. Yellow Cab Co., supra, 67 Cal.2d 695, 706, 713, must be followed before a claimant may recover damages, particularly when departure will result in recovery by others than those who paid. Similarly, “fluid recovery” in the instant case provides no correlation between those who paid excess tax and those who might reap the benefit of a future reduction in redemption price. Those who left California after redeeming their stamps and those who have died will hardly benefit; further, the great reduction in the stamp business indicates that those still redeeming stamps represent no more than a fraction of those who paid the excess tax. In contrast, any excess reimbursement benefited a larger class, the citizenry of California which includes the purported class. Balancing fairness, should not any overcharge remain in the public treasury?

This is an improper class action and the trial court abused its discretion in certifying it as one.⁴

Writ of mandamus shall issue directing respondent court to vacate its order certifying the class and to enter an order dismissing the class action. Petitioners shall recover their costs.

Wright, C. J., McComb, J., and Richardson, J., concurred.

1 On 27 April 1970, Blue Chip stopped collecting sales tax reimbursement, changing to a “tax included” basis for its redemption transactions.

2 The trial court calculated the overcharge to be approximately 6 cents per book, indicating that the sales tax per book should have been 9 cents rather than 15. Assuming that one stamp was issued for each 10 cents of purchase, a member of plaintiff class to recover $10 would have had to redeem stamps representing $20,000 in purchases.

3 Subsequent to the trial court’s rulings, it was held that a trial court must adjudicate procedural class action issues, including determination and notification of the classes involved, before it may determine a motion for partial summary judgment. (Home Sav. & Loan Assn. v. Superior Court (1976) 54 Cal.App.3d 208 [126 Cal.Rptr. 511].)

4 Petitioners have no adequate remedy by appeal from final judgment. Delaying review until final judgment—while the trial court attempts to manage the unmanageable—would mean that the parties could not obtain appellate review until after they had paid the great costs which render the damage action inappropriate. Thus, appeal from a final judgment is not a practical remedy. (See 5 Witkin, Cal. Procedure (2d ed. 1971) pp. 3823-3826; cf. Vasquez v. Superior Court (1971) 4 Cal.3d 800, 806-807 [94 Cal.Rptr. 796, 484 P.2d 964, 53 A.L.R.3d 513].) Moreover, absence of another adequate remedy was determined by this court when we granted an alternative writ. (E.g., City of Los Angeles v. Superior Court (1959) 51 Cal.2d 423, 429 [333 P.2d 745].)