Class Action Defense Cases-CashCall v. Superior Court: California State Court Affirms Trial Court Order Permitting Class Action Plaintiff Who Was Never Member Of Putative Class To Obtain Precertification Discovery Of Actual Class Member Identities

Apr 9, 2008 | By: Michael J. Hassen

As Matter of First Impression, Request in Class Action for Precertification Discovery by Plaintiffs who Learns They were Never Members of Putative Class is not Automatically Prohibited and Trial Court did not Err in Permitting such Discovery where Wrong Alleged Involved Surreptitious Recording of Telephone Calls so Class Members would not Know Their Privacy Rights had been Violated California State Court Holds

Plaintiffs filed class action against their lender, CashCall, alleging that it secretly and illegally monitored its collection calls in violation of the borrowers’ privacy rights; they subsequently filed an amended class action complaint alleging further that defendant “surreptitiously monitored or eavesdropped on their conversations through a machine or other manner” in violation of California law. CashCall, Inc. v. Superior Court, ___ Cal.App.4th ___, 2008 WL 192282, *1 (Cal.App. January 24, 2008). After discovering that the plaintiffs named in the class action had not had their calls monitored, the class action complaint was further amended to substitute new named plaintiffs, id. However, the new plaintiffs, too, were not members of the putative class so plaintiffs sought precertification discovery for the identities of the apparently 551 members of the putative class action whose calls had been surreptitiously recorded. Id., at 1-2. Defense attorneys argued a bright-line rule exists in class actions that preclude discovery of the identity of class members if the named plaintiffs were never members of the class, id., at *3. The trial court disagreed and defense attorneys petitioned the Court of Appeal for writ relief.

The appellate court summarized plaintiffs’ argument as follows: CashCall disclosed in discovery that it had monitored collection calls at least 551 times but refused to disclose the names or contact information of the borrowers at issue. CashCall, at *2. Plaintiffs argued, “It is the clandestine component that makes [CashCall’s] monitoring illegal, and it is that aspect [that] makes it difficult, if not impossible, for a victim to ever learn [his or her] rights were violated.” Id. Absent the requested discovery, “the class action might be dismissed for lack of a suitable class representative and then the one-year statute of limitations” may run, “leaving the actual class members without a remedy for CashCall’s violation of their privacy rights.” Id. Plaintiffs argued that the trial court should apply a “balancing test” and “should conclude the rights of the parties (i.e., class members) outweigh any potential abuse of the class action procedure and therefore should order that CashCall disclose the names and contact information of the 551 putative class members.” Id. They relied on Parris v. Superior Court, 109 Cal.App.4th 285, 300-01, which held that in determining whether to grant precertification discovery of the identities of putative members of the class action, the “trial court must…expressly identify any potential abuses of the class action procedure that may be created if the discovery is permitted, and weight the danger of such abuses against the rights of the parties under the circumstances.”

Defense attorneys opposed the precertification discovery sought arguing that under First American Title Ins. Co. v. Superior Court, 146 Cal.App.4th 1564 (Cal.App. 2007), the motion should be denied because the named plaintiffs lacked standing and “because they were never members of the putative class.” CashCall, at *3. First American states at page 1566, “If a class action representative plaintiff is not – and never was – a member of the class he purports to represent, may he obtain precertification discovery from the defendants for the express purpose of identifying a member of the class who is willing to become a named plaintiff and pursue the action? As the current plaintiff is, in effect, a stranger to the action, we conclude the grant of such discovery would sanction an abuse of the class action procedure.” The appellate court characterized the defense argument as seeking a bright-line rule that class action plaintiffs who lack standing because they were never members of the putative class are barred from obtaining the identities of actual class members: “Under CashCall’s proposed bright-line rule, a trial court is required to deny a motion for precertification discovery, without applying the Parris balancing test and exercising its discretion to permit precertification discovery.” CashCall, at *6. The trial court granted plaintiffs’ motion, ruling that CashCall must deliver the contact information of members of the putative class action to a third party mailing house so that letters could be sent to those borrowers inquiring into a willingness to serve as a class representative. Id., at *4-*5. Defense attorneys then sought writ relief, id., at *5.

The appellate court affirmed. After a lengthy discussion, the Court held, as a matter of first impression, that “there is no bright-line rule that the original class representative plaintiffs must be members of the class to have standing to obtain precertification discovery.” CashCall, at *1; see also id., at *6. Accordingly, it concluded further that the trial court did not abuse its discretion in applying a balancing test “and ordering precertification discovery in a class action for the purpose of identifying class members who may become substitute plaintiffs in place of named plaintiffs who were not members of the class they purported to represent.” Id. In part, the appellate court relied on the California Supreme Court’s opinion in Pioneer Electronics (USA), Inc. v. Superior Court, 40 Cal.4th 360, 373 (Cal. 2007), which stated that “Contact information regarding the identity of potential class members is generally discoverable, so that the lead plaintiff may learn the names of other persons who might assist in prosecuting the case.”

Put simply, a class action should not be treated differently than a non-class action in terms of substituting in a new named plaintiff, and whether precertification discovery to identify “actual class members” is subject to the Parris balancing test. CashCall, at*10. Under the appellate court’s analysis, the trial court did not abuse its discretion in allowing precertification in this case because “the trial court could reasonably conclude the rights of the class members outweighed the potential for abuse of the class action procedure.” Id., at *12. As the Court detailed at page *12:

In considering the rights of the class members, the court noted as factors the alleged secret nature of CashCall’s call monitoring (of which the class members remained unaware), the potential statute of limitations problem, and the fact that there was no other action or enforcement pending to provide class members with relief for the alleged violations of their privacy rights. In the circumstances of this case, the rights and interests of the class members are significant. If, as alleged, the 551 class members were, and remain, unaware of CashCall’s secret monitoring of the calls between its collection department employees and the class members, those class members presumably will, absent precertification discovery and notification, remain unaware of CashCall’s secret monitoring of their calls and alleged violation of their privacy rights. Accordingly, without precertification discovery and notification, there is virtually no practical possibility that any of those 551 class members will learn of CashCall’s secret call monitoring and therefore have sufficient knowledge to investigate and potentially assert causes of action against CashCall, whether as a named plaintiff in the instant (or another) class action or as an individual plaintiff. Furthermore, absent that knowledge, there is, as the trial court noted, a potential time bar…that could preclude all or some of the 551 class members from ever obtaining any relief for CashCall’s alleged violations of their privacy rights. (Footnote omitted.)

While the Court of Appeal was “cognizant of the possibility that precertification discovery could, in certain circumstances, result in abuse of the class action procedure,” it concluded that such abuse was unlikely to occur in this case because each of the named plaintiffs had believed their calls had been surreptitiously monitored and only CashCall knew whether they were among the 551 individuals at issue. CashCall, at *13. In the appellate court’s view, “Rather than continuing this process of substituting in new plaintiffs who were customers of CashCall (if the attorneys have such additional clients) and relying on CashCall to inform them whether their calls had been monitored, the current five named plaintiffs reasonably chose to shortcut this process by filing the instant motion for precertification discovery of the identities of the 551 class members (i.e., those customers who CashCall admitted had calls monitored). If, on discovery of their names and contact information by CashCall to the third-party mailing house and delivery of the court-approved notice to the class members, one or more of them elects to become a named plaintiff in this class action, then the action presumably will proceed with an appropriate class representative and the class members will potentially obtain relief for CashCall’s alleged violations of their privacy rights. We do not consider this process to be an abuse of the class action procedure in the circumstances of this case.” Id., at *14. Accordingly, it affirmed the trial court order permitting the precertification discovery requested. Id., at *17.

NOTE: Despite the lengthy legal analysis contained therein, the author finds CashCall irreconcilable with First American (followed by Cryoport Systems v. CNA Ins. Cos., 149 Cal.App.4th 627 (Cal.App. 2007)). At first blush, it would seem but a simple matter to distinguish the two cases by the fact that in CashCall there was no way for the named plaintiffs to know if they were members of the class without discovery from the defendant, but the same was true of the putative class action plaintiff in First American. By contrast, Parris and First American are readily harmonized by the fact that Parris involved a request by precertification discovery by a plaintiff that was a member of the putative class, while First American addressed a request by precertification discovery by a plaintiff that was never a member of the putative class. Parris is thus consistent with the general rule in California that precertification discovery for the purpose of finding a substitute plaintiff is unavailable if the original named plaintiffs never had standing to prosecute the action.

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