Antitrust Law Daily Wrap Up, PRIVACY—SDCal: In Cell Phone Privacy Suit, Discovery of Dial Lists, “Prior Express Consent” Evidence, and Insurance Coverage Ordered Prior to Class Certification, (Mar 28, 2013)

By William Zale, J.D.

In a putative class action the under Telephone Consumer Protection Act brought by individuals who allegedly received unconsented-to, autodialed calls on their cell phones from frozen foods delivery firm Schwan’s Home Service, the federal district court in San Diego has ruled that Schwan’s must produce outbound dial lists, evidence of “prior express consent,” and insurance coverage information (Knutson v. Schwan’s Home Service, Inc., March 25, 2013, Bartick, D.).

The threshold requirement for discoverability under Rule 26(b)(1) of the Federal Rules of Civil Procedure is whether the information sought is “relevant to any party’s claim or defense.” In addition, “[f]or good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.”

Generally at the pre-class certification stage, discovery in a putative class action is limited to certification issues such as the number of class members, the existence of common questions, the typicality of claims, and the representative’s ability to represent the class, the court noted. Although discovery on the merits is usually deferred until it is certain that the case will proceed as a class action, the merits/certification distinction is not always clear.

Outbound dial lists. The plaintiffs contended that the defendant should be compelled to produce its outbound dial lists and call reports for the dial lists. The defendant contended that the requests are overly broad and unduly burdensome.

The court found that the information sought is relevant to class certification issues. Although it overlapped with the merits of plaintiffs’ case, the Supreme Court recently recognized that this is not altogether uncommon in class actions, the court observed, citing Wal-Mart Stores Inc. v. Dukes, 131 S.Ct. 2541, 2551-52 (2011).

The defendant maintained that the plaintiffs are requesting information about an estimated 3.9 million phone calls nationwide, and that many of the calls would have been placed to landlines. The plaintiffs suggested that it would not require an unreasonable number of hours or cause undue expense for the defendant to determine the number of calls placed to cell phones using an autodialer. They stated that, if necessary, they have a consultant who can review the outbound dial lists, and in a matter of weeks perform a “cell phone scrub” to determine which calls are actionable, as long as the defendant produces the information in a searchable electronic format.

The court found that the outbound dial lists and reports were relevant at this stage of the litigation, and should be produced in a searchable electronic format. The court said that it was willing to entertain a joint motion for a protective order.

Prior express consent. The plaintiffs requested information relating to the affirmative defense of “prior express consent,” in anticipation of the defendant’s assertion of this defense in opposition to class certification. While contending that its 3.9 million customers consented to receiving prerecorded calls in numerous ways, including by email, through the company’s website, over the telephone, and verbally to their route sales representatives at their front door, the defendant argued that it would be unduly burdensome, if not impossible, to produce the information requested.

The court noted that the defendant had proposed a middle-ground by suggesting a sampling procedure, which was apparently rebuffed by plaintiffs. Sampling should afford the plaintiffs sufficient information for their class certification motion, and would not overburden the defendant, the court said. With respect to records kept after November 2012, the court decided that defendant should produce all of the electronic records of express consent it has kept within its computer database. While still time consuming, the effort associated with producing electronically stored information is not as great as that required to produce information that is not in a computer database, according to the court.

Insurance coverage. The plaintiffs sought to compel the defendant to produce evidence of its insurance coverage. The plaintiffs contended that the defendant referenced an insurance agreement in the Master Services Agreement between the defendant and call services provider CustomerElation, a recently added co-defendant. The defendant responded that it has no insurance policy to produce, that it is self-insured, and that the Defendant explains that the Master Services Agreement placed a duty on CustomerElation to obtain certain insurance coverage.

The court determined that, if defendant has a copy of any insurance policies held by CustomerElation pursuant to the Master Services Agreement, the defendant should provide those documents to the plaintiffs. The case is No. 12cv964-GPC (DHB).

Attorneys: Abbas Kazerounian (Kazerounian Law Group, APC) for Erik Knutson. Alan L. Rupe (Kutak Rock, LLP) for Schwan’s Home Service, Inc.

Companies: Schwan’s Home Service, Inc.; CustomerElation, Inc.

Cases: Privacy CaliforniaNews