Class Action

Another new class member discovery decision: CashCall, Inc. v. Superior Court

By Kimberly A. Kralowec

In CashCall, Inc. v. Superior Court, ___ Cal.App.4th ___ (Jan. 24, 2008), the Court of Appeal (Fourth Appellate District, Division One) handed down another significant discovery-related opinion, holding that the trial court appropriately permitted "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." Slip op at 2.

In so holding, the Court distinguished First American Title Ins. Co v. Superior Court (Sjobring), 146 Cal.App.4th 1564 (2007). In First American, the Court of Appeal (Second Appellate District, Division Three) refused to permit such discovery to "a class action representative plaintiff [who] is not ? and never was ? a member of the class he purports to represent" because, under the circumstances of that case, "the grant of such discovery would sanction an abuse of the class action procedure." Id. at 1566. In CashCall, the Court of Appeal found First American distinguishable:

Unlike in First American, we conclude the potential for abuse of the class action procedure is not significant in this case. In First American, the plaintiff essentially "appointed himself enforcement officer for the California Department of Insurance settlement agreement" and "piggybacked" his class action onto that settlement agreement (possibly to obtain attorney fees). (First American, supra, 146 Cal.App.4th at p. 1577.) That scenario appears to exemplify the classic type of abusive class action of which CashCall warns. However, those circumstances do not exist in this case. There is no state or other investigation, much less a settlement, involving CashCall's secret call monitoring program. Absent continuation of the instant class action, there likely will be no other investigation of CashCall's conduct or potential relief obtained by class members for its alleged violations of their privacy rights. Furthermore, because only CashCall has knowledge of which customers' calls were monitored, the plaintiffs cannot be faulted for filing a class action based on the suspicion their privacy rights may have been violated and only later learning from CashCall that their calls had not been monitored (and therefore they do not have standing). Accordingly, unlike in First American, the potential for abuse of the class action procedure in this case is minimal. Neither the reasoning nor the result in First American persuades us that the trial court in this case abused its discretion by granting the plaintiffs' motion for precertification discovery of the identities of class members. Rather, we conclude the trial court, in applying the Parris balancing test, did not abuse its discretion.

CashCall, slip op. at 34-35 (citing Parris v. Superior Court, 109 Cal.App.4th 285 (2003)).

The Court described the "Parris balancing test" as follows:

In deciding whether to order precertification discovery of the identities of potential class members, a "trial court must . . . expressly identify any potential abuses of the class action procedure that may be created if the discovery is permitted, and weigh the danger of such abuses against the rights of the parties under the circumstances."

Id. at 11. Whether to permit the discovery is within the trial court's discretion. Id. The Court rejected CashCall's proposed "bright-line rule," under which "a trial court [would be] required to deny a motion for precertification discovery, without applying the Parris balancing test and exercising its discretion to permit precertification discovery." Id. at 12 (footnote omitted). The Court explained:

Although we agree with the general principle that a plaintiff must have standing to assert a cause of action, we are not persuaded by CashCall's assertion in the context of class actions that standing of the original named plaintiff(s) at the beginning of the action is necessarily a requirement for continuation of the action. Rather, we conclude that a trial court, exercising its reasonable discretion in applying the Parris balancing test in the circumstances of a particular case, may order precertification discovery of the identities of class members (i.e., those with standing) who, when contacted, ultimately may elect to be substituted as named plaintiffs to continue prosecution of the class action on behalf of the class.

Id. at 13.

My prior posts on First American are here and here. Another recent discovery-related decision, handed down nine days before CashCall, is also of interest. My post on Puerto v. Superior Court (Wild Oats Markets, Inc.), ___ Cal.App.4th ___ (Jan. 15, 2008) (Second Appellate District, Division Seven) is available at this link.

Full post as published by The UCL Practitioner on February 04, 2008 (boomark / email).