Hypertouch, Inc. v. Superior Court

Decision Date05 May 2005
Docket NumberNo. A108321.,A108321.
Citation128 Cal.App.4th 1527,27 Cal.Rptr.3d 839
CourtCalifornia Court of Appeals Court of Appeals
PartiesHYPERTOUCH, INC., Petitioner, v. The SUPERIOR COURT of San Mateo County, Respondent; Perry Johnson, Inc., Real Party in Interest.

Epstein, Becker & Green, P.C., Joseph D. Miller, Leslie J. Mann, San Francisco, Pilchak Cohen & Tice, P.C., Daniel G. Cohen, for Real Party in Interest, Perry Johnson, Inc.


This writ proceeding arises out of a class action alleging the sending of unsolicited advertisements to a telephone facsimile machine in violation of the Telephone Consumer Protection Act of 1991 (TCPA) (47 U.S.C. § 227(b)(1)(C)), which authorizes a private right of action in state court. (Id., § 227(b)(3).)

Petitioner Hypertouch, Inc., a California corporation based in Redwood City, is the named plaintiff, and real party in interest Perry Johnson, Inc., a consulting company that does business in California, is the defendant. In addition to actual and punitive damages, and injunctive relief, plaintiff seeks statutory damages of $500 for each violation of the TCPA, and treble that amount for each willful violation. (47 U.S.C. § 227(b)(3).) The complaint also alleges causes of action for civil conspiracy and unfair business practices. (Bus. & Prof.Code, § 17200 et seq.)

Plaintiff seeks writ relief from the trial court order approving notice to the class insofar as it provides that, in order to participate in this civil action, individual members of the certified class "must opt-in to same and not opt-out," and the judgment "will only bind those class members that opt-in." Plaintiff maintains the "opt-in" requirement is constitutionally unnecessary and "eviscerates the class action device." We agree and shall therefore grant a peremptory writ.


On September 11, 2000, the Federal Communications Commission (FCC) cited defendant for violating the TCPA by sending an unsolicited advertisement to a telephone facsimile machine, and by failing to comply with provisions of the TCPA and FCC rules requiring any person or entity sending a message via a telephone facsimile machine to clearly include in the message "an identification of the business, other entity, or individual sending the message and the telephone number of the sending machine or of such business, other entity, or individual." (47 U.S.C. § 227(d)(1)(B); 47 C.F.R. § 68.318(d) (2004).)

Shortly after the complaint was filed on October 9, 2001, plaintiff commenced discovery to obtain, among other things, the database containing the telephone numbers to which defendant sent unsolicited advertisements by telephone facsimile machines (the fax database). Defendant objected on the ground the database was a customer list containing confidential information and therefore privileged as a "trade secret." (Civ.Code, § 3426.1, subd. (d).) Judge Rosemary Pfeiffer agreed and denied plaintiff's motion to compel discovery of the fax database.1 On February 27, 2003, after determining that plaintiff had nevertheless established an "ascertainable class" with "a well-defined community of interest in the questions of law and fact involved affecting all the parties to be represented," Judge Pfeiffer granted plaintiff's motion for class certification. On July 3, 2003, Judge Marc R. Forcum issued a temporary restraining order prohibiting defendant from continuing to send unsolicited advertisements by facsimile, and on August 28, 2003, Judge George A. Miram issued a preliminary injunction extending that prohibition. Discovery was for the most part supervised by Judge Beth L. Freeman, who ruled on several motions to compel answers to interrogatories. After plaintiff learned defendant had destroyed the database containing the phone numbers from which persons called to request that defendant cease sending facsimiles (the do not fax database), which was apparently done in the ordinary course of business, plaintiff issued subpoenas duces tecum to defendant's telecommunication service providers, Global Crossing and Qwest Communications, requesting the phone numbers contained in the do not fax database. Defendant's motion to quash the subpoenas was denied by Judge Quentin Kopp on November 6, 2003. Global Crossing provided plaintiff the phone numbers from which 29,549 persons called defendant's toll-free number requesting the cessation of facsimile advertisements, and Qwest Communications supplied 112,500 such phone numbers.

Plaintiff moved for an order approving notice to the certified class on December 24, 2003. The motion papers asserted that defendant had destroyed relevant evidence revealing the identity of thousands of class members but that, by subpoenas to defendant's telecommunication service providers, plaintiff discovered the telephone numbers from which approximately 142,049 prospective members of the class called defendant's toll-free number asking to be removed from its facsimile database. Plaintiff proposed that—due to defendant's destruction of its do not fax database, its use of a trade secret privilege to refuse to disclose the database of numbers to which unsolicited facsimiles were sent, and its greater financial resources—the cost of identifying and noticing class members should be borne by defendant. Plaintiff also submitted the declaration of Dan Rosenthal, the owner of Rosenthal & Company, a claims administrator, who estimated he would be able to obtain the names and addresses of 40 to 60 percent of the 142,049 persons who called defendant's toll-free number asking to be removed from the list that defendant used to send unsolicited facsimile messages. Estimating that 20 percent of the 142,049 calls were duplicate, Rosenthal believed his company could obtain approximately 45,500 to 68,200 different names and addresses. Plaintiff proposed that the class members Rosenthal was able to identify receive personal notice by first-class mail and that additional notice be published one time in USA Today, the largest national daily newspaper. Rosenthal would provide a toll-free automated telephone response system and a Web site to provide prospective class members access to information, and process the requests of persons who wished to be excluded from the class. The estimated cost of Rosenthal & Company's proposed services was between $107,400 and $122,900.

Plaintiff's motion for an order approving notice to the class was considered by Judge Carol Mittelsteadt. In an order dated October 13, 2004, Judge Mittelsteadt found that "[t]he stake of individual members is substantial and personal notification is necessary, and the plaintiff's proposed manner of giving notice does not satisfy due process requirements." This finding created a problem, however, because members of the class previously certified by Judge Pfeiffer could not be identified and personal notification was therefore impossible. Judge Mittelsteadt sought to resolve this problem by ordering that notice be given by publication and class members who wish to be included in the action must "opt-in." The court appears to have reasoned that the affirmative act of "opting in" confirms receipt of the "actual notice" the court believed was constitutionally necessary.

The court appointed Rosenthal & Company class administrator, ordered plaintiff to pay the cost of publication of notice in USA Today and, also at its own expense, to "create a website setting the Notice of Pendency of Class Action and the means by which class members opt-in, including by electronic-mail addressed to Rosenthal & Company," and to "attempt to place the Notice of Pendency of Class Action on as many junk fax websites as possible with the opportunity for class members to opt-in the class by electronic e-mail." The order states that "class members must opt-in to the class action no later than January 7, 2005," and directs that the publication of notice in USA Today must occur "at least 30 days prior to the opt-in deadline for class members."

On November 15, 2004, plaintiff petitioned this court for a writ of mandate or an alternate writ directing respondent court to vacate its order requiring class members to "opt-in" rather than "opt-out" of the certified class. The petition maintains that requiring prospective class members to act affirmatively in order to participate in this action "defeats the purpose of the class action device and the goal of judicial economy," and is not required by the due process clause of the Fourteenth Amendment.

We issued an order to show cause why a peremptory writ of mandate should not issue as prayed for in the petition and stayed the trial court's order of October 13, 2004.

As we shall explain, the "opt-in" requirement is not necessitated by due process, conflicts with the applicable rules of court, and undermines the purpose of class actions.

I. Standard of Review

A trial court has broad discretion to determine the manner of notice in class actions. (Cal. Rules of Court, rule 1856 (hereinafter, California rule 1856).) We review the ruling for abuse of discretion. (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 251, 110 Cal. Rptr.2d 145.) "`The scope of discretion always resides in the particular law being applied, i.e., in the "legal principles governing the subject of [the] action...." Action that transgresses the confines of the applicable principles of law is outside the scope of discretion and we call such action an "abuse" of discretion.'" (Lealao v. Beneficial California, Inc. (2000) 82 Cal. App.4th 19, 25, 97 Cal.Rptr.2d 797.) To the extent the trial court's ruling is based on assertedly improper criteria or incorrect legal assumptions, we review those questions de novo. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435-436, 97 Cal. Rptr.2d 179, 2...

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