Cashcall revisited: Safeco Insurance Company of America, et al. v. Superior Court confirms that trial court can grant plaintiff lacking standing the right to discover proper class plaintiff

In 2008, CashCall, Inc. v. Superior Court (2008) 159 Cal.App.4th 273 surprised class action practitioners when a Court of Appeal approved of a trial court decision granting a proposed class representative that never had standing the right to pursue class member identity discovery for the purpose of locating a suitable replacement plaintiff. At the time, the decision was viewed as potentially conflicting with First American Title Ins. Co. v. Superior Court (2007) 146 Cal.App.4th 1564. Defendants characterized First American as creating a blanket prohibition on precertification discovery by a plaintiff that cannot represent the proposed class. As it turns our, the appellate Court panel that issued First American had something to say about how its opinion should have been interpreted. In Safeco Insurance Company of America, et al. v. Superior Court (April 30, 2009), the First American panel (Second Appellate District, Division Three) affirmed a Trial Court Order authorizing precertification discovery for the purpose of locating a suitable class representative with standing to assert claims on behalf of the class.

Before turning to the comments of substance, its worth a moment to offer sympathies to everyone involved in the litigation. The action was filed in January 2002. (Slip op., at p. 3.) The case was then stayed for a year while the Insurance Commissioner evaluated the case. (Slip op., at p. 4.) Once the Insurance Commissioner declined to take the case, litigation moved forward, but hit another road block when the Trial Court stayed the matter to await rulings in potentially controlling appeals in other insurance cases. (Slip op., at pp. 4-5.) Then Proposition 64 passed, and the original plaintiff, the Proposition 103 Enforcement Project had to find a new plaintiff. Much hilarity ensued. You get the idea. Thirteen pages of procedural history tell the tale.

The Court then reviewed a number of precertification discovery cases, including CashCall:

“CashCall rejected the argument that, in cases where the plaintiffs have never been class members, a bright-line rule precluding precertification discovery to identify class members should apply and the weighing test from Parris, supra, 109 Cal.App.4th 285, should be inapplicable. (CashCall, supra, 159 Cal.App.4th at pp. 285-286, 290-291.) Citing the general rule liberally allowing amendments of complaints to substitute new plaintiffs with standing (id. at pp. 287-288), CashCall stated that a class action plaintiff without standing should be allowed to move for, and potentially obtain, precertification discovery to identify potential class members. (Id. at p. 290.) CashCall stated that class action plaintiffs who never had standing should not necessarily be treated less favorably than class action plaintiffs who once had but then lost standing, and that the Parris weighing test should apply in both circumstances. (CashCall, supra, at p. 290.)

(Slip op., at p. 24.) The Court then harmonized its ruling in First America with CashCall and reinforced the holding of CashCall:

“First American, supra, 146 Cal.App.4th 1564, does not stand for the proposition that a plaintiff who was never a class member in a UCL action necessarily is not entitled to conduct precertification discovery to identify a substitute class representative. Although we emphasized the potential for abuse of the class action procedure in those circumstances (id. at pp. 1566, 1573, 1578), we did not establish any categorical rule against precertification discovery. Instead, we weighed the potential for abuse of the class action procedure against the rights of the parties and decided that to allow precertification discovery in the particular circumstances of that case would be an abuse of discretion. (Id. at pp. 1576-1577.) CashCall, supra, 159 Cal.App.4th 273, held that there was no bright-line rule against allowing plaintiffs who never had standing to conduct precertification discovery for the purpose of identifying potential class members with standing. (Id. at pp. 285-286, 290-291.) We agree, and conclude that the weighing test from Parris, supra, 109 Cal.App.4th 285, applies in UCL cases, as in other cases.

(Slip op., at pp. 26-7.) There are at least two morals of this story. First, don't make the mistake of telling a Court of Appeal what it meant when it issued a prior decision unless you are really sure you know exactly what it meant. Second, make sure that, if you move for precertification discovery to find a new class representative, the trial court engages in the balancing test required in Parris.