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Courts Uphold Discovery to Replace Class Representative Who Never Had Standing

There is yet another published opinion applying both Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360 and Best Buy Stores, L.P. v. Superior Court (2006) 137 Cal.App.4th 772, to wage and hour class actions with respect to obtaining class member identities and contact information, even 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" (our emphasis).

In CashCall, Inc. v. Superior Court (2008) 159 Cal.App.4th 273, the Fourth District Court of Appeal held that the trial court correctly allowed precertification discovery in a class action for that purpose, following Pioneer Electronics and Best Buy Stores, and distinguishing First American Title Ins. Co v. Superior Court (2007) 146 Cal.App.4th 1564, in which the Court of Appeal rejected the idea of permitting such discovery to a class action representative who had never been a member of the class he purported to represent because, under the circumstances of that case, "the grant of such discovery would sanction an abuse of the class action procedure." In essence, the Court of Appeal limited the First American holding only to those situations in which the substitution of plaintiffs would constitute an abuse of the class action procedure. The court noted that in First American, the plaintiff had, for all intents and purposed "appointed himself enforcement officer for the California Department of Insurance settlement agreement" to piggyback his case onto a settlement agreement and perhaps generate attorney's fees for the plaintiff's counsel. 

In contrast, in the Cashcall case, there was no state or other investigation, much less a settlement pending. Absent continuation of the class action, there would 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 had knowledge of which customers' calls were monitored, the plaintiffs could not 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 particular calls had not been monitored, leaving them without standing.

Because Kagan and the other cases discussed above recognize the general rule liberally allowing amendments of complaints to substitute new plaintiffs who have standing and, in particular, allowing an original plaintiff without standing to substitute in a new plaintiff with standing (whether in a class action or otherwise), an original plaintiff who lacks standing in a class action should be allowed to file a motion for, and potentially obtain, precertification discovery of the identities of actual class members (i.e., potential plaintiffs with standing who may elect to serve as substitute class representative plaintiffs). There is no reason to necessarily treat original plaintiffs who never had standing differently from, and more favorably than, original plaintiffs who had, but lost, standing. We conclude the Parris balancing test should be applied by trial courts in exercising their discretion whether to grant or deny an original plaintiffs' precertification motion for discovery of the identities of class members regardless of whether that original plaintiff had standing at the beginning of the action. (See, e.g., Best Buy Stores, L.P. v. Superior Court, supra, 137 Cal.App.4th at p. 779; Parris, supra, 109 Cal.App.4th at pp. 300–301; Budget Finance Plan v. Superior Court, supra, 34 Cal. App. 3d at p. 799; Pioneer Electronics (USA), Inc. v. Superior Court, supra, 40 Cal.4th at p. 373.) Accordingly, we reject CashCall's contention that a bright-line rule should apply in class actions to require trial courts to necessarily reject precertification discovery motions by plaintiffs who never had standing. First American, supra, 146 Cal.App.4th 1564, and Cryoport Systems v. CNA Ins. Cos. (2007) 149 Cal.App.4th 627 [57 Cal. Rptr. 3d 358], cited by CashCall, are factually inapposite and do not persuade us to conclude otherwise. Furthermore, neither case adopted or applied the bright-line rule proposed by CashCall in its petition.
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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 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.

You can download the full text of CashCall, Inc. v. Superior Court here in pdf or word format. A petition for review and application for stay were denied by the California Supreme Court earlier this month.

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