Monday, August 27, 2001
Court of Appeal Says ‘Students’ in TWA Sales Training Can Sue for Refunds
By a MetNews Staff Writer
A group of low-income people who claim they paid $2,800 to take a worthless sales training course that was supposed to lead to jobs with Trans World Airlines, Inc. can sue for restitution, this district’s Court of Appeal ruled Friday.
Div. Five reinstated a class action against National Collection Systems, Inc., which collected the money from class members on TWA’s behalf.
In an unpublished portion of his opinion, Presiding Justice Paul A. Turner said the collection agency, which does business as National Collection Management or NCM, could be held liable under the theory it conspired with TWA to defraud the plaintiffs.
The panel declined to stay the appeal pending resolution of the bankruptcy petition brought by TWA after its brief in the case was filed. Turner noted the appeal has been pending for well over a year.
Trans World Airlines, Inc. sold most of its assets to the parent company of American Airlines earlier this year. The air carrier’s operations are now being conducted by an AA subsidiary.
NCM argued that the present suit is barred by res judicata principles, because the attorney general and the district attorney previously sued NCM and TWA on the same claims—that the course was worthless because it didn’t guarantee employment with TWA and the subject matter was so specific to TWA that it wouldn’t help the students get or maintain other employment.
That suit resulted in stipulated judgments granting injunctive relief, along with restitution for 63 named persons, none of whom were plaintiffs in the case ruled on Friday.
Turner Friday agreed with those plaintiffs that because they received no restitution in the earlier case, they can sue for it now.
“An action [for unfair and deceptive business practices] by a prosecutor is fundamentally different from a class action or other representative litigation,” Turner explained.
The prosecutor sues on behalf of the public generally; any remedies for individuals damaged by the unlawful practice are ancillary, the presiding justice said. The governmental official who brings the suit, he added, typically isn’t a member of the class.
The decision represents a change in position for the court, which ruled in June that the judgment in the prior action precluded the restitution claim under the facts as pled, but that the plaintiffs could amend their complaint.
Friday’s opinion on rehearing cited People v. Pacifc Land Research Co., (1977) 20 Cal.3d 10, which was not cited in the original opinion. That case held that an action brought by the public prosecutor for unfair competition in connection with land sales wasn’t subject to the same due process concerns as a class action would be.
Pacific Land, Turner said, “demonstrates that the California Supreme Court views an unlawful competition law action differently from other forms of representative litigation.”
Attorneys on appeal were Brian S. Kabateck and Penny J. Manship of Quisenberry & Kabateck, Stuart B. Esner of Esner & Chang, and Nate G. Kraut for the plaintiffs, Jeffery J. Carlson, Charles R. Messer and Joseph R. Zamora of Carlson, Messer & Turner for National Collection Systems, and Supervising Deputy Attorney General Ronald A. Reiter for the state as amicus.
The case is Payne v. National Collection Systems, Inc., B135352.
Copyright 2001, Metropolitan News Company