Cashcall, Inc. v. Superior Court

• Decision Date: 24 January 2008
• Docket Number: No. D051293.,D051293.
• Parties: CASHCALL, INC., Petitioner, v. The SUPERIOR COURT of San Diego County, Respondent; Raymond Cole et al., Real Parties in Interest.
• Court: California Court of Appeals Court of Appeals

71 Cal.Rptr.3d 441

159 Cal.App.4th 273

CASHCALL, INC., Petitioner, v. The SUPERIOR COURT of San Diego County, Respondent Raymond Cole et al., Real Parties in Interest.

No. D051293.

Court of Appeal, Fourth District, Division 1.

January 24, 2008.

Finlayson, Augustini & Williams, Jesse S. Finlayson, and Michael R. Williams, Sacramento, for Petitioner.

No appearance for Respondent.

Law Offices of Douglas J. Campion, Douglas J. Campion, San Diego; Hyde & Swigart and Joshua B. Swigart, San Diego, for Real Parties in Interest.

McDONALD, Acting P.J.

We hold that in the circumstances of this case the trial court did not err by 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. We conclude 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.

FACTUAL AND PROCEDURAL BACKGROUND

On May 16, 2006, plaintiffs Amanda Kight, Kay-Francis Mulligan, and Brenda Guzman filed a class action complaint against defendant CashCall, Inc., and 50 "Doe" defendants (CashCall) alleging violation of their privacy rights.¹ The complaint alleged each of the plaintiffs had borrowed money from CashCall, and Cash-Call, in making consumer loans and collecting delinquent payments on those loans, had "illegally secretly monitor[ed] telephone and other conversations between [CashCall's] employees and Plaintiffs, as well as other class members as alleged herein." The complaint alleged: "Such illegal monitoring was done for the purpose of assisting [CashCall] in its collection efforts against Plaintiffs and the other class members" and "was done ... without Plaintiffs' knowledge or consent or without the class members' knowledge or consent." It further alleged, on information and belief, that CashCall's "corporate representative has admitted under oath that as a regular part of its ongoing daily business practices, [CashCall] monitors a number of collection calls with alleged debtors." The complaint alleged three causes of action: (1) unlawful invasion of privacy in violation of Penal Code section 632;² (2) unlawful intrusion into private affairs; and (3) violation of the right to privacy under article I, section 1 of the California Constitution. The complaint sought general and special damages, statutory damages of at least $5,000 per incident pursuant to Penal Code section 637.2,³ punitive damages, and injunctive relief to prevent the alleged illegal acts in the future.

The plaintiffs subsequently filed a first amended class action complaint, alleging CashCall also surreptitiously monitored or eavesdropped on their conversations through a machine or other manner in violation of Penal Code section 631, subdivision (a).⁴ The first amended complaint also added a cause of action seeking injunctive relief pursuant to Penal Code section 637.2, subdivision (b).⁵

On February 27, 2007, apparently after learning CashCall had not secretly monitored any of the telephone conversations between its employees and the three named plaintiffs, those plaintiffs filed an amendment to their complaint, substituting in their place new named plaintiffs Raymond Cole, Stephanie Hyatt, Steven Aragon, Toyia Baker, and Sakeena Christmon.

On June 4, the five new named plaintiffs filed a motion for an order compelling CashCall to identify class members. In their memorandum of points and authorities, the plaintiffs explained: "During discovery it was learned that the original three named representative Plaintiffs were not in fact persons [whose calls] were monitored, according to [CashCall's] records. Therefore, five additional persons were then named as representative Plaintiffs. It was later learned that those, too, were not on the list of [persons whose calls were monitored]." They further noted that discovery from CashCall showed there were about 551 persons whose calls were monitored. With the trial court's consent at the case management conference, the parties agreed to allow the court to decide the motion without requiring the plaintiffs to first formally seek production of those names and contact information and have CashCall refuse that production request.

The plaintiffs stated they sought "to obtain the names of CashCall debtors [whose calls] were monitored without their consent in order to substitute in a [named] Plaintiff [whose call] was in fact actually monitored." They further stated: "Because of the very nature of the illegal conduct—secret monitoring of telephone calls—it goes without saying that even persons whose calls have been secretly monitored do not know and cannot know if their-rights have been violated without reference to [CashCall's] records." The 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." During discovery, Cash-Call admitted there were at least 551 instances in which it had monitored calls, but it provided the plaintiffs with only the account numbers of those customers whose calls were monitored and did not disclose those customers' names or contact information. The plaintiffs argued:

"It is clearly an abuse of [the putative class members' rights] to be denied a suitable class representative because of such a `Catch 22' absurdity—if they know of the monitoring, it is legal because they know of it; if they don't know of it, it is illegal, but only those persons [who] don't know of it can be named class representatives, as the conduct is only illegal as to those unaware of such monitoring. So no class representative could ever be named as no one could ever come forward with such a complaint! Thus, in [applying] the balancing test weighing the potential abuse of the class action system versus the rights of the parties as required; ... this factor should be strongly considered in considering how the rights of the parties would be prejudiced by refusing to provide this requested discovery."

The plaintiffs expressed concern that, without the requested discovery, the class action might be dismissed for lack of a suitable class representative and then the one-year statute of limitations under Code of Civil Procedure section 340 would run, leaving the actual class members without a remedy for CashCall's violation of their privacy rights. They argued the trial court, in applying the balancing test, 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. They argued: "Not allowing such requested discovery and [subsequent] substituting in a suitable class representative will prevent any action to be filed because any further actions will be time barred, because of the one[-]year statute of limitations. [Cash-Call] will then likely avoid any penalties for engaging in such egregious conduct, and will be able to continue such conduct with impunity until such time in the future [when] someone else [may] determine[] [he or she has] been a victim."

CashCall opposed the plaintiffs' motion for precertification discovery of the names and contact information of CashCall's customers whose calls it had secretly monitored. Citing First American Title Ins. Co. v. Superior Court (2007) 146 Cal. App.4th 1564, 53 Cal.Rptr.3d 734 (First American), CashCall argued the trial court should deny the motion because the named plaintiffs lacked standing because they were never members of the putative class (i.e., their calls had not been secretly monitored by CashCall). CashCall argued that "providing [the named plaintiffs] the discovery that they seek would sanction an abuse of the class action procedure by allowing the Named Plaintiffs' attorneys to make an `end-run' around the standing requirements by filing a class action in the name of individuals who are not members of the class that they seek to represent and then using precertification discovery to obtain more appropriate plaintiffs." CashCall further argued: "[B]ecause the potential for abuse of the class action procedure is so overwhelming where the named plaintiffs do not have standing, there should not be any obligation to consider the alleged rights of the actual (but absent) putative class members at all." It essentially argued the trial court should summarily deny the plaintiffs' motion without applying the balancing test applied in First American.

In support of CashCall's opposition, it submitted the declaration of Louis Ochoa, its vice president of loan servicing, who declared that:

"5. Management and supervisory personnel in CashCall's collections department have the ability to monitor telephone calls between CashCall collection representatives and CashCall customers that are initiated by CashCall or by the customer using CashCall's Cisco telephone system and call monitoring software. CashCall has written policies and procedures regarding call monitoring, and each supervisor in CashCall's collections department receives training with respect to call monitoring.

"6. Pursuant to CashCall's call monitoring policies and procedures, each CashCall collection representative is monitored and evaluated on two to four collection calls per month by a supervisor in the collections department. For each telephone call that is monitored, the supervisor who conducted the call monitoring completes an on-line call monitoring tracking and scoring form. CashCall's supervisory personnel use call monitoring to ensure that collection representatives are using basic collection techniques, following CashCall's call model, and operating within the...