Cal Insurance Regulation

No problem, at least, according to counsel representing an uninjured class representative, who will undoubtedly argue that his client, despite having no standing, can nevertheless obtain pre-certification class discovery to obtain the identities of an actual injured class plaintiff to step in.

Let me repeat that.  You might be sued in a class action in California by a plaintiff who is unharmed by you.  While you may be in the process of having a court determine that the plaintiff was never in fact harmed (by way of a motion for summary judgment, which will take at least 4 months to be heard, but typically longer), that plaintiff can seek discovery that may be used to identify an actual injured plaintiff and have that plaintiff substituted in to maintain the class action.

Ridiculous?  Not quite since some of you may have already faced this issue.  It is an issue that regularly comes up, but even more so after the passage of Proposition 64, which suddenly resulted in a number of private attorney general plaintiffs to suddenly lose standing under California’s Unfair Competition Law. 

This issue has also received a "shot in the arm" due to the Court of Appeal’s decision earlier this year in CashCall v. Sup. Ct., 159 Cal. App. 4th 273 (2008), in which such discovery was granted. (In that case, it was alleged that the defendant was secretly recording the telephone conversations of clients without their consent. Despite not having a plaintiff who was actually subject to this alleged illegal conduct, the plaintiffs were granted discovery to identify those individuals who have been surreptitiously recorded so that they could besubstituted into the action.)

So, what does this mean for the industry? 

Well, it has really become another one of the standard issues that your attorney can expect to address in seeking to dispense of a class action lawsuit.   The bright side, however, is that the courts are mindful of the potential abuse of the class action procedure that may arise from the use of a "straw" plaintiff.  If it is the case that the original plaintiff knew or should have reasonably known that he was an inappropriate plaintiff, a court will likely be inclined to deny a request to obtain discovery for a more appropriate plaintiff.  On the other hand, if the facts are more extreme, such as those in CashCall, where no one but the defendant had information as to the identities of injured "victims," a court will be more inclined to grant that discovery. 

[For cases that have denied such discovery, see First American Title Ins. Co. v. Sup. Ct., 146 Cal. App. 4th 1564 (2007), and Cryoport Sys. v. CNA Ins. Cos., 149 Cal. App. 4th 627 (2007), are cases where such discovery has been denied.]