McCurley v. Royal Sea Cruises, Inc.

• Decision Date: 31 July 2020
• Docket Number: Case No. 17-cv-00986-BAS-AGS
• Parties: JOHN MCCURLEY, DAN DEFOREST, individually and on behalf of all others similarly situated, Plaintiff, v. ROYAL SEA CRUISES, INC, Defendant.
• Court: U.S. District Court — Southern District of California

JOHN MCCURLEY, DAN DEFOREST, individuallyand on behalf of all others similarly situated, Plaintiff, v. ROYAL SEA CRUISES, INC, Defendant.

Case No. 17-cv-00986-BAS-AGS

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA

July 31, 2020

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' FIRST AMENDED MOTION TO STRIKE WITNESS DECLARATIONS, FOR RESTRAINING ORDER, FOR MONETARY SANCTIONS, AND FOR DISQUALIFICATION OF COUNSEL

[ECF No. 129]

On March 4, 2020, Plaintiffs filed a First Amended Motion to Strike Witness Declarations, for Restraining Order, for Monetary Sanctions, and for Disqualification of Counsel ("Motion"). (ECF No. 129.) Defendant opposed the Motion on April 6, 2020 and Plaintiffs replied on April 13, 2020. (Opp'n, ECF No. 168; Reply, ECF No. 169.) After hearing oral argument on the Motion (ECF No. 189), and for the reasons stated below, the Court GRANTS IN PART and DENIES IN PART Plaintiffs' Motion.

I. STATEMENT OF FACTS

On March 27, 2019, this Court certified a class of individuals who had received telephone calls from non-party Prospects DM, Inc. ("Prospects") on behalf of Defendant Royal Seas Cruises, Inc. ("Royal") by use of an automatic telephone dialing system ("ATDS") between November 2016 and December 2017, where such calls were placed for the purposes of marketing to non-customers of Royal and whose cellular telephone numbers had been obtained via two websites: www.diabeteshealth.info or www.youautohealthlifeinsurance.com. (ECF No. 87.) The Court certified a Subclass of the above individuals who were actually transferred to Royal after Prospects made the call. (Id.)¹

For a variety of reasons, class notice did not go out to potential class members until one year later in March 2020. After certification, Defendant began contacting class members. Defendant called all individuals who were transferred from www.diabeteshealth.info, and to whom a sale was actually made. (Dep. of Melissa Hanson ("Hanson Dep.") 23:10-13, Ex. 2 to Opp'n ECF No. 168-2.) Thus, all of these individuals had been transferred from Prospects to Royal and were, therefore, members of the Subclass. Defendant placed approximately 560 calls to these class members. (Hanson Dep. 22:1-3.) Defendant reached 23 individuals, 19 of whom Defendant admits were class members. (Opp'n at 4.) Three of these class members signed affidavits indicating that they had voluntarily entered their telephone number in the www.diabetesthealth.info website and consented to be called. (Opp'n at 6.)

Defendant used a script, drafted by Defendant's attorneys, to contact these class members. (Hanson Dep. 19:4-8.)²

II. PROCEDURAL HISTORY

Plaintiff filed a putative class action complaint on May 12, 2017. (ECF No. 1.) The Court consolidated the case with another pending class action complaint, and Plaintiffs filed a consolidated class action complaint on December 20, 2017. (ECF Nos. 28, 31.)

On July 30, 2018, Plaintiffs filed a class certification motion. (ECF No. 49.) A key issue in the class certification motion was whether class members had agreed as a whole to be called by entering their telephone numbers into the above two web sites and whether entering their telephone numbers constituted consent to be called. (ECF No. 58, at 7.) At the request of defense counsel, the Court gave Defendant additional time to investigateand respond. (ECF Nos. 53, 38.) Additionally, at the request of defense counsel, the Court permitted Defendant to file a sur-reply, which it did on February 12, 2019. (ECF Nos. 84, 86.) Thus, defense counsel had seven months to investigate and brief the issue of consent.

On March 27, 2019, the Court ultimately granted in part the motion for class certification. (ECF No. 87.) On the issue of consent, the Court found "that whether Royal's lead generation program is a valid means of obtaining consent for calls by a third party concerning Royal's services and whether the leads constitute consent are common questions." (Id. at 41.) The Court pointed out that the "opt-in" forms, relied on by defense counsel, "may have actually been obtained through sources other than the consumer." (Id. at 87.)

After class certification was granted, the Court ordered that fact discovery be completed by October 18, 2019. (ECF No. 91 at ¶ 5.) At the request of the parties, this order was modified to allow fact discovery to be completed by February 19, 2020. (ECF No. 113.)

On January 17, 2020, one month before fact discovery was scheduled to be closed, Defendant served a Second Supplemental disclosure on Plaintiffs' counsel identifying three class members as witnesses and providing three signed declarations from these witnesses dated August 7, 2019, September 23, 2019 and October 2, 2019. (Ex. A to Bacon Decl., ECF No. 129-2.) Plaintiffs immediately filed a motion asking that these declarations be excluded. (ECF No. 120.) Defense counsel moved to conduct discovery of class members on February 10, 2020, asking, for the first time, that they be allowed to depose the three witnesses they had already contacted ex parte. (ECF No. 123; see also Bacon Decl. ¶ 7.) Plaintiffs then filed the instant First Amended Motion on March 4, 2020. (ECF No. 129.)³

III. ANALYSIS

There is no question that "[a] lawyer is forbidden from communicating with a party the lawyer knows to be represented by counsel, regarding the subject of the representation, without counsel's consent." See Parks v. Eastwood Ins. Services, Inc., 235 F. Supp. 2d 1082, 1082 (C.D. Cal. 2002) (citing Rule of Professional Conduct of the Calif. State Bar, Rule 2-100; ABA Model Rules of Professional Conduct, Rule 42). "Once an attorney-client relationship is established, the attorney serves as a shield protecting the client." Id.

"In a class action certified under Rule 23 . . . absent class members are considered represented by class counsel unless they choose to 'opt out.'" Id. (citing Kleiner v. First Nat'l Bank of Atlanta, 751 F.2d 1193, 1207 n.28 (11th Cir. 1985)); see also Resnick v. American Dental Ass'n, 95 F.R.D. 372, 376 (N.D. Ill. 1982) ("'After a court has certified a case as a class action and the time for exclusions has expired, the attorney for the class representative represents all class members who are otherwise unrepresented by counsel. Defense counsel must observe the rules of ethical conduct in those circumstances and communicate with the opposing parties through their attorney, who is counsel for the class.'") (quoting 2 Newberg, Class Actions § 2730(d), at 1220 (1977)). The issue becomes a little more difficult when, as here, the class has been certified, but the potential class members have not yet been given the opportunity to opt out.

"Many courts have adopted the view that the attorney-client relationship between class counsel and class members attache[s] upon entry of an order certifying the class and does not await the expiration of any opt out period." McLaughlin on Class Actions §11.1 (citing Kleiner; Good v. W. Virginia Am. Water Co., No. 2:14-01374, 2016 WL 6404006, at *2 (S.D. W.Va. 2016); Fulco v. Continental Cablevision, Inc., 789 F. Supp. 45, 47 (D. Mass. 1992); Gortat v. Capala Bros. Inc., No. 07-cv-3629 (ILG) (SMG), 2010 WL 1879922, at *2 (E.D.N.Y. 2010), objections overruled 2010 WL 3417847 (E.D.N.Y. 2010); see also Dodona I, LLC v. Goldman, Sachs and Co., 300 F.R.D. 182, 187 (S.D.N.Y. 2014) ("The majority of courts, including at least one court in this district, have found that class certification itself creates an attorney-client relationship, at least for the limitedpurpose of aiding prospective class members in deciding whether or not to join the class action.") (quotations and citations omitted). "Other courts, and the American Bar Association, have expressed the view that the attorney-client relationship is established only upon expiration of the opt out period." McLaughlin on Class Actions §11.1 (citing In re Wells Fargo Wage & Hour Emp't Practice Litigation, 18 F. Supp. 3d 844, 851 (S.D. Tex. 2014); Velez v. Novartis Pharm. Corp., No. 04 Civ. 9194 (CM), 2010 WL 339098, at *2 (S.D.N.Y. 2010); In re Katrina Canal Breaches Consol. Litig., No. 05-4182, 2008 WL 4401970, at *3 (E.D. La. 2008); A.B.A. Committee on Ethics and Prof's Responsibility, Formal Op. 07-445, at 3 (2007).

The reason for prohibiting contact between defense counsel and the unnamed members of the class is that unilateral contact by defense counsel "is rife with potential for coercion." Kleiner, 751 F.2d at 1202. "Unsupervised, unilateral communications with the plaintiff class sabotage the goal of informed consent by urging exclusion on the basis of a one-sided presentation of the facts without the opportunity for rebuttal. The damages from misstatements could well be irreparable." Id.; see also Dodona, 300 F.R.D. at 184-5 ("The court's primary purpose in supervising communications is . . . to ensure that potential class members receive accurate and impartial information regarding the status, purposes and effects of the class action.") (quotation omitted).

Even pre-certification, "[t]he Supreme Court has held that Rule 23 allows a court, in appropriate circumstances to restrict communications between a party and members of a . . . putative class." Ralph Oldsmobile, Inc., v. General Motors Corp., No. 99 Civ. 4567 (AGS), 2001 WL 1035132, at *2 (S.D.N.Y. Sept. 7, 2001) (citing Gulf Oil v. Bernard, 452 U.S. 89 (1981)). Restricting communications must be based on a clear record and specific findings showing the reason the limitation is necessary. Gulf Oil, 452 U.S. at 101-102. Communications that are coercive or misleading or those that "solicit[] opt outs, or even simply discourage[e] participation in a case, undermine the purposes of Rule 23" and can warrant court intervention. Marino v. CACafe, Inc., No. 16-cv-6291 YGR, 2017 WL 1540717, at *2 (N.D. Cal. Apr. 28, 2017). "The test for coercion is whether the conductsomehow overpowers the free will or business judgment of the potential class...