Antitrust Law Daily Wrap Up, PRIVACY—S.D. Cal.: Class certification denied in TCPA action against Yahoo!, (Sep 25, 2015)

By Michael Menzhuber, J.D., LL.M.

A motion for class certification, in an action claiming that Yahoo! Inc. violated the Telephone Consumer Protection Act (TCPA) by sending unsolicited text messages using an automatic telephone dialing system (ATDS), was denied by the federal district court in San Diego. The court denied the motion after determining that the proposed individual class representative did not define an ascertainable class and failed to satisfy the requirements of Federal Rule of Civil Procedure 23 (Sherman v. Yahoo! Inc., September 23, 2015, Gonzalo, P.).

Background. Susan Pathman received a text message from an individual via Yahoo’s Mobile SMS Messenger Service (PC2SMS). This service allows registered Yahoo users to send instant messages to mobile devices from their computers through the Yahoo Messenger platform. According to Pathman, Yahoo sent her, via an ATDS, an unsolicited spam text message informing her that a Yahoo user had sent her a message (welcome message). According to Yahoo, whenever a Yahoo user would send a message using the PC2SMS service, Yahoo automatically checked a database (Optin DB) to see whether anyone had previously sent a message to that mobile number. If that recipient’s mobile number had never before received a text message sent via the PC2SMS service: (1) a welcome message was appended to the user’s message; and (2) the new mobile number was saved in the Optin DB to prevent potential recipients from receiving multiple copies of the welcome message.

Pathman filed an action, individually and on behalf of those similarly situated, claiming that Yahoo violated the TCPA by sending the unsolicited welcome message. Yahoo opposed Pathman’s motion for class certification and, in its opposition brief, relied on two expert reports. Pathman objected to these reports and Yahoo’s reliance on them in a Motion for Rule 37(c) Sanction. Yahoo objected to the motion and filed an ex parte application for leave to file a surreply to Pathman’s motion for class certification. Pathman opposed the application and Yahoo filed a reply brief. At the conclusion of the hearing, the parties were given the opportunity to file supplemental brief after Pathman had an opportunity to depose Yahoo’s two experts. Pathman later filed a supplemental brief and Yahoo filed a reply.

Motion for Rule 37(c) Sanctions. Yahoo’s failure to disclose two experts was harmless because, although it indicated at the initial hearing that it was inclined to consider the reports, it had set another hearing to: (1) allow Pathman to depose both experts and respond to their conclusions; and (2) provide time for the parties to file supplemental briefings.

Ex Parte Application for Leave to File Surreply. Yahoo argued that it must be allowed to respond to matters that Pathman presented, for the first time, in her reply brief, including Pathman’s: (1) newly-proposed method of ascertaining a class through reverse-number lookup; (2) misrepresentations and omission; and (3) certain newly-proposed class definitions. The court agreed with Pathman that the arguments in the reply brief were largely responsive to issues Yahoo had raised in its opposition brief. However, it found that it was appropriate to allow Yahoo the opportunity to respond to Pathman’s proposed limitations on the class and further explanation as to methods of ascertaining the class.

Motion for Class Certification. As a threshold issue, Yahoo argued that Pathman’s class was not ascertainable because she did not demonstrate that any source, or combination of sources, of information existed from which class members could be identified. The court agreed. After thoroughly reviewing all of Pathman’s proposed methods of ascertaining the class, the court found that she had not met her burden of demonstrating that there was an administratively feasible method of identifying putative class members. It further concluded that, even if Pathman were to utilize all of the methods that she proposed, she would still be left with a data set of questionable reliability that covered only some unknown fraction of the putative class. The court, however, noted that, despite its conclusion that Pathman had not met her burden of ascertaining the class, a lack of ascertainability alone is insufficient to defeat class certification.

Under Rule 23(a), the requirements of numerosity, commonality, typicality, and adequate representation must be satisfied. Yahoo did not object to Pathman’s proposed class on numerosity and commonality grounds but contended that Pathman was neither a typical nor adequate class representative because: (1) the manner in which she provided consent only coincided with a select group of members of the putative class; and (2) she might be incentivized to litigate the case in a manner favorable to her consent profile or to settle to the detriment of other class members. Yahoo also noted that Pathman had a history of settling putative class action lawsuits, including TCPA cases, prior to certification.

Yahoo argued that Pathman’s consent profile was unique to other class members because she created two Yahoo accounts thirteen years apart and agreed to both the Yahoo’s Universal Terms of Service Agreement (uTOS) and Yahoo’s Communications Additional Terms of Service Agreement (Comms ATOS) which where were in effect at those times. The court agreed with Yahoo and concluded that the distinctions between her consent profile and that of other class members put her in the position of having interests not typical of the entire class and, thus, being preoccupied with unique defenses. The court also concluded that Pathman’s incentive to settle the case would be based on considerations not representative of the entire class.

With respect to the Rule 23(b)(a) “predominance” requirement that “ questions of law or fact common to the class members predominate over any questions affecting only individual members, Pathman contended that the requirement was met because the principal factual and legal issues common to the case were whether Yahoo sent spam text messages to the class members without their consent. Pathman further contended that, to the extent that Yahoo raised, as an affirmative defense, that the class members consented to receiving the welcome message, Yahoo’s consent theories either applied to the class as a whole or failed outright. Yahoo countered that, regardless of whether consent was an affirmative defense or an element of Pathman’s claim, she bore the burden of proving that the issue of consent can be determined by generalized proof. Yahoo also contended that the consent theories did not apply on a class wide basis.

The court noted that, in its discussion of the ascertainability of the class, it identified holes in Pathman’s method of identifying class members. The court determined that, in addition to calling into question how the class might be ascertained, this kind of individualized inquiry suggested that common questions did not predominate over individual ones. The court concluded that, since Pathman failed to show that any theory of generalized proof overcame the need for individualized determinations of if, and when, the putative class members gave prior express consent to receive the welcome message, the individualized issues of consent predominated over common questions.

The court also determined that the Rule 23(b)3) requirement that class resolution must be “superior to other available methods for the fair and efficient adjudication of the controversy” was not satisfied because of its concerns as to: (1) the predominance and ascertainability issues; and (2) how narrowly Pathman had drawn the class, creating the potential of further litigation and the possibility of inconsistent verdicts.

The case is No. 13cv0041-GPC-WVG.

Attorneys: Abbas Kazerounian (Kazerounian Law Group APC), David James McGlothlin and Joshua Swigart (Hyde & Swigart), and Vincent Louis DiTommaso (DiTommaso Lubin, PC) for Susan Pathman. Ian Charles Ballon (Greenberg Traurig, LLP) for Yahoo! Inc.

Companies: Yahoo! Inc.

Cases: Privacy CaliforniaNews