Dean Witter Reynolds, Inc. v. Superior Court

• Decision Date: 22 June 1989
• Docket Number: No. A044415,A044415
• Citation: 211 Cal.App.3d 758,259 Cal.Rptr. 789
• Court: California Court of Appeals Court of Appeals
• Parties: DEAN WITTER REYNOLDS, INC., Petitioner, v. The SUPERIOR COURT of Alameda County, Respondent. Manuel ABASCAL, Real Party in Interest.

Page 789

259 Cal.Rptr. 789

211 Cal.App.3d 758

DEAN WITTER REYNOLDS, INC., Petitioner, v. The SUPERIOR COURT of Alameda County, Respondent.

Manuel ABASCAL, Real Party in Interest.

No. A044415.

Court of Appeal, First District, Division 2, California.

June 22, 1989.

As Modified on Denial of Rehearing July 21, 1989.

Review Denied Sept. 21, 1989.

Tower C. Snow, Jr., Robert T. Sullwold, David S. Rosenbloom, Edward R. Reines, and Orrick, Herrington & Sutcliffe, San Francisco, for petitioner Dean Witter Reynolds, Inc.

No appearance by respondent.

Manuel Glenn Abascal and Kathy Shull Abascal, Berkeley, pro se.

Stephen Kaus, James M. Wagstaffe, and Kaus, Kerr & Wagstaffe, San Francisco, for real party in interest, Manuel Abascal.

PETERSON, Associate Justice.

This action was brought by real party Manuel Abascal, on behalf of himself and others similarly situated, to challenge the legality of certain fees charged by petitioner Dean Witter Reynolds, Inc. (Dean Witter) in connection with self-directed individual retirement accounts (IRA's). By this petition in mandamus, Dean Witter seeks to set aside the trial court's order permitting the case to proceed as a class action.

I. FACTS

Abascal is an attorney and a self-described "specialist in class action litigation involving financial institutions[ ]...." In April 1983 he opened a self-directed IRA at Dean Witter. He chose Dean Witter because he was acquainted with one of its account representatives, and its offices were conveniently near his. He knew that other financial institutions offered such accounts, but he did not investigate the terms on which those services were offered. He did not do so for two reasons: first, because "this is my personal life and I don't give as much attention to it as I do [to] my professional life"; and second, because his experience with financial institutions led him to believe that there was an "oligopolistic market" in which competitors would not present consumers with any difference in terms sufficient to justify the inconvenience and difficulty of comparing alternatives.

About nine days before he actually opened his IRA at Dean Witter, Abascal received a booklet describing the account. The booklet disclosed a "[o]ne-time set up fee" of $20, an "[a]nnual maintenance fee" of $20, and an "[a]ccount termination fee" of $50. Abascal did not recall whether he read the booklet before opening his account. He recalled no oral representations concerning fees, except that there was an annual maintenance fee. He expected to pay that fee and also a "setup fee." He conceded that he would have known about the $50 termination fee if he had read the booklet describing the account.

Abascal liquidated his account in April 1985. Dean Witter deducted a $50 "termination fee" and transmitted the remainder to Abascal. Abascal wrote to Dean Witter in October 1985 asserting that he had been unaware of such a fee, and it was unlawful. He demanded a refund on behalf of himself, his wife (who had also opened an account), and "all others who have been similarly charged." Dean Witter did not honor the demand, and this suit followed.

The first amended complaint charges three alleged unlawful practices of Dean Witter: (1) assessing the $50 "close-out" or "termination" fee upon closing the IRA; (2) assessing the $20 "annual maintenance fee" on January 1 of each year, rather than on the anniversary date of the opening of the account; and (3) failing to rebate a pro rata portion of the annual maintenance fee when the account is closed before the end of the year. Abascal's action is assertedly brought on behalf of persons who established a Dean Witter IRA which was subject to a close-out fee of $50, and all persons who paid such a fee. It pleads seven counts against Dean Witter, two of its employees, and its corporate parent. However, demurrers were sustained as to all counts in favor of all defendants except Dean Witter, and as to four counts (breach of fiduciary duty, conversion, unjust enrichment, and restraint of trade in violation of Bus. & Prof.Code, § 16700 et seq.) in favor of Dean Witter. Abascal waived leave to amend the complaint.

Thus the complaint pleaded three remaining counts against Dean Witter. The first cause of action charges that Dean Witter's collection of the close-out fee and its practices concerning the annual fee constitute unfair competition in violation of Business and Professions Code section 17200 et seq. The third cause of action alleges that the close-out fee only is excessive and unconscionable under Civil Code section 1670.5. The fourth cause of action alleges that the close-out fee only is unconscionable and thus violates section 1770, subdivision (s), ¹ of the Consumers Legal Remedies Act (CLRA), Civil Code section 1750 et seq.

On Abascal's motion, the trial court ordered that all claims should proceed as a class action. The class was defined as all California residents who were customers of Dean Witter; and all customers of whatever residency who opened IRA's at a California Dean Witter office, who had IRA's with Dean Witter on or after April 24, 1982, which accounts are either still in existence or were terminated or transferred after April 25, 1982 (inferentially, the date four years before the original complaint was filed). Dean Witter initiated this proceeding for an extraordinary writ directing the trial court to set aside that order. We directed Abascal to show cause why a writ should not issue as prayed. We stayed further trial court proceedings pending determination of the petition.

II. APPELLATE JURISDICTION

An intermediate order concerning class certification is not appealable unless it disposes of the entire action. (Rosack v. Volvo of America Corp. (1982) 131 Cal.App.3d 741, 749, 182 Cal.Rptr. 800, cert. denied (1983) 460 U.S. 1012, 103 S.Ct. 1253, 75 L.Ed.2d 482.) Such an order is appropriately challenged by mandate before proceedings take place on the merits. (Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 387, fn. 4, 134 Cal.Rptr. 393, 556 P.2d 755; Danzig v. Jack Grynberg & Associates (1984) 161 Cal.App.3d 1128, 1136, 208 Cal.Rptr. 336, cert. denied (1985) 474 U.S. 819, 106 S.Ct. 67, 88 L.Ed.2d 55.)

III. CONTENTIONS OF THE PARTIES

Dean Witter contends that the trial court abused its discretion in certifying Abascal's claims for class action treatment. With respect to the first cause of action charging unfair business practices alleged to constitute unfair competition, Dean Witter asserts that a class action is unnecessary since all remedies available under the pertinent statutes may be obtained in an action by an individual. The third cause of action claim of unconscionability under Civil Code section 1670.5 is contended to be nonmeritorious and purportedly brought under a statute that provides no right to affirmative relief. The CLRA claim set forth in the fourth cause of action is asserted to be unsuitable for class treatment because Abascal's own claims are without merit. (See Civ.Code, § 1781, subd. (c)(3) [court may consider whether action is without merit].) In this regard Dean Witter contends that Abascal cannot demonstrate the " 'absence of meaningful choice' " requisite to a finding of unconscionability, because there were numerous competing institutions offering IRA's on terms other than those Abascal challenges here, and nothing prevented Abascal from contracting with one of those institutions rather than with Dean Witter. Alternatively, Dean Witter asserts that individual issues concerning unconscionability predominate over common issues. (See Civ.Code, § 1781, subd. (b)(2).)

Abascal contends that Dean Witter is estopped to rely on a supposed lack of substantive merit since Dean Witter has successfully resisted discovery on the merits of the claims. Abascal also challenges Dean Witter's premise that the availability of competing IRA's defeats a claim of unconscionability. Abascal makes no specific response to Dean Witter's arguments concerning the unfair competition claim.

IV. STANDARD OF REVIEW

A plaintiff moving for class action treatment bears the burden of establishing that the requisites for such treatment are present. (Hamwi v. Citinational-Buckeye Inv. Co. (1977) 72 Cal.App.3d 462, 471, 140 Cal.Rptr. 215; see also Vasquez v. Superior Court (1971) 4 Cal.3d 800, 820, 94 Cal.Rptr. 796, 484 P.2d 964.) In ordinary class actions, this requires the plaintiff to show that there is "an ascertainable class and a well-defined community of interest among the class members." (B.W.I. Custom Kitchen v. Owens-Illinois, Inc. (1987) 191 Cal.App.3d 1341, 1347, 235 Cal.Rptr. 228, citing Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 704, 63 Cal.Rptr. 724, 433 P.2d 732.) The trial court has great discretion to determine whether the requisite showing has been made. (B.W.I. Custom Kitchen v. Owens-Illinois, Inc., supra, 191 Cal.App.3d at p. 1348, 235 Cal.Rptr. 228; Hamwi v. Citinational-Buckeye Inv. Co., supra, 72 Cal.App.3d at p. 472, 140 Cal.Rptr. 215.) "[R]eviewing courts will not disturb a trial court ruling on class certification which is supported by substantial evidence unless (1) improper criteria were used or (2) erroneous legal assumptions were made." (B.W.I. Custom Kitchen v. Owens-Illinois, Inc., supra, 191 Cal.App.3d at p. 1348, 235 Cal.Rptr. 228.) "So long as [the trial] court applies proper criteria and its action is founded on a rational basis, its ruling must be upheld." (Hamwi v. Citinational-Buckeye Inv. Co., supra, 72 Cal.App.3d at p. 472, 140 Cal.Rptr. 215, citing Occidental Land, Inc. v. Superior Court (1976) 18 Cal.3d 355, 361, 134 Cal.Rptr. 388, 556 P.2d 750.)

The propriety of class action treatment for claims under the CLRA is determined according to the criteria contained in that Act, specifically at Civil Code section 1781. ² Trial courts retain discretion to determine whether the statutory criteria have been met, but the Act "circumscribes the factors which ...