Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County, No. BC390593, Rolf M. Treu, Judge.
Engstrom, Lipscomb & Lack, Walter J. Lack, Jerry A. Ramsey, Paul A. Traina, Jared W. Beilke; Sinclitico & Burns, Dennis J. Sinclitico and Hugh R. Burns for Plaintiffs and Appellants.
Cole Pedroza, Curtis A. Cole, Joshua C. Traver; LaFollette, Johnson, De Haas, Fesler & Ames, Dennis K. Ames, Douglas Guy Dickson for Defendant and Respondent Direct Mail Services, Inc.
Lewis Brisbois Bisgaard & Smith, Jeffry A. Miller, Tim J. Vanden Heuvel and Matthew B. Stucky for Defendant and Respondent Graphic Center.
Steptoe & Johnson, Edward Gregory and Jason Levin for Defendant and Respondent California Public Employees’ Retirement System (CalPERS).
KLEIN, P. J.
Plaintiffs and appellants Michael D. Scott (Scott) and Earle W. Robitaille (Robitaille) (collectively, plaintiffs), individually and on behalf of all others similarly situated, appeal an order denying their motion for class certification of their action against defendants and respondents California Public Employees’ Retirement System (CalPERS), Graphic Center (Graphic), and Direct Mail Services, Inc. dba American Mail Service (Direct) (collectively, defendants).
The order denying class certification is appealable under the death knell doctrine because the order, effectively ringing the death knell for the class claims, is in essence a final judgment on those claims. (In re Baycol Cases I & II (2011) 51 Cal.4th 751, 757; Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 699.)
In August 2007, CalPERS sent an election brochure to approximately 391, 000 retired members. All or part of the retirees’ social security numbers were printed on the address labels, in an unspaced and unhyphenated form, above their names. The brochures were created by Graphic and were mailed by Direct. Plaintiffs filed suit against CalPERS, Graphic and Direct and sought to certify a class of all CalPERS members whose privacy rights were violated by this disclosure of their social security numbers.
The trial court denied certification of plaintiffs’ three statutory causes of action – violation of Business and Professions Code section 17200 et seq. (Unfair Competition Law) (UCL), violation of Civil Code 1798 et seq. (Information Practices Act of 1977), and violation of Government Code section 20230 (confidential character of data and individual records of CalPERS members) – on the ground a class action is not the superior means of resolving the litigation. The trial court denied class certification of plaintiffs’ negligence claim on the ground of lack of superiority, as well as because common questions did not predominate. The trial court also found Scott and Robitaille were not representative of the class they sought to represent.
The trial court is afforded great discretion in granting or denying certification, and a trial court ruling supported by substantial evidence generally will not be disturbed unless (1) improper criteria were used, or (2) erroneous legal assumptions were made. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326-327 (Sav-On).) Any valid pertinent reason stated will be sufficient to uphold the order. (Id. at p. 327.)
Based on our review of the record, we perceive no abuse of discretion in the trial court’s ruling and therefore affirm the order denying class certification.
FACTUAL AND PROCEDURAL BACKGROUND
1. The data security breach.
In August 2007, CalPERS sent a brochure in the mail to 391, 000 retiree members, notifying them of an upcoming election for the retiree representative seat on the CalPERS Board of Administration. CalPERS hired Graphic to conduct the printing of the brochure and to hire a mail house for addressing and placing the brochure in the mail. Graphic hired Direct to do so. The brochures were sent out via U.S. Mail with all or part of the social security number of each retiree, appearing as a series of numbers without hyphens, printed above the retiree’s name and address, on the exterior of the brochure. There was nothing on the address panel to indicate the sequence of numbers was a social security number.
2. The source of the disclosure.
CalPERS provided a disk to Direct for use in connection with the mailing, and the disk included the names, addresses and social security numbers of 391, 000 retiree members. Tim Tannehill at Direct made the decision to print the nine digit identification number above the address on the proofs he provided to CalPERS, without inquiring what the number signified. CalPERS then reviewed and approved the proofs. On or about August 13, 2007, the brochures were sent out bearing the retirees’ social security numbers.
3. CalPERS’ response to the data security breach.
On August 15, 2007, CalPERS received a complaint from a CalPERS member that his social security number was printed on the outside of a brochure, above his name and address.
On August 17, 2007, CalPERS sent a letter to each member that had received the brochure alerting them a “data security breach” had occurred. The letter advised the members they could place a fraud alert on their credit files by contacting any of the three credit bureaus (Experian, Equifax and/or TransUnion) and that they were entitled to a free copy of their credit report. The members were counseled to review their credit reports for any suspicious activity.
About two months later, on October 22, 2007, CalPERS issued a follow-up letter, advising the members that CalPERS had “partnered with CSIdentity Corporation to provide you with one FREE year of Credit Monitoring service... [and] $25,000 of Identity Theft Insurance, as well as toll-free access to an Identity Recovery Advocate in the unlikely event you experience an identity theft event. As an added deterrent, you will receive reports that will alert you if someone is using your name or address to commit identity theft. We have paid for this service on your behalf; no credit card or payment information will be required from you, and CSIdentity will not try to sell you additional products.” CalPERS members were given 90 days to enroll for the identity theft monitoring and insurance.
4. Proceedings.
a. Pleadings.
Plaintiffs filed suit on May 9, 2008 and filed the operative first amended class action complaint against CalPERS, Graphic and Direct some three months later. The operative pleading set forth four causes of action: (1) unlawful business acts or practices, in violation of Business and Professions Code section 17200 et seq., predicated on a violation of Civil Code section 1798 et seq., the Information Practices Act of 1977; (2) general negligence; (3) violation of Civil Code section 1798 et seq.; and (4) violation of Government Code section 20230 (confidential character of data and individual members of CalPERS members).
b. Plaintiffs’ motion for class certification.
On April 2, 2009, plaintiffs filed their motion for class certification, seeking to certify a class of “All CalPERS members whose names, addresses and social security numbers were publicly released on or around August 13, 2007 by CalPERS, Graphic Center, American Mail Service and/or their agents.”
Plaintiffs contended the matter should proceed as a class action because (1) the class as defined is numerous and ascertainable; (2) the common questions of law and fact predominate, namely, whether release of the class members’ social security numbers violated Business and Professions Code section 17200 et seq., Civil Code section 1798 et seq., and/or Government Code section 20230, and was negligent; and (3) the two representative plaintiffs’ claims were typical of the class.
Plaintiffs further argued, “the Class action mechanism is a superior method of litigation to adjudicate the Class members’ claims. It is undisputed that the number of potential Class members whose social security numbers were affixed to the outside of the brochure, sent by CalPERS, is numerous. If separate actions were brought individually by each member of the Class, the resulting multiplicity of lawsuits would cause undue hardship on the Court as well as the litigants. Because the claims of each and every Class member is based on the same allegation – disclosure of private confidential information – the same evidence and arguments will be advanced to support each and every Class members’ claims. The use of the Class action device was meant for cases exactly like the one that is before the Court.”
The moving papers “anticipated that Defendants will argue that no real substantive benefits will accrue to the Class members as a result of this Class Action, [in that] Defendants will argue, that either the Class members have not suffered injury or that [the Defendants] have already provided benefits to the Class members.” The plaintiffs argued the remedy CalPERS provided was inadequate, and in any event, the disclosure of the class members’ social security numbers in and of itself constituted injury.
Plaintiffs relied on Potter v. Firestone Tire & Rubber Co. (1993) 6 Cal.4th 965, a toxic exposure case, which held medical monitoring costs are a compensable item of damages in a negligence action where the evidence demonstrates, through reliable medical expert testimony, that the need for future monitoring is a reasonably certain consequence of the plaintiff’s toxic exposure and that the recommended monitoring is reasonable. (Id. at p. 974.) Plaintiffs contended “[a]pplying a similar analysis here to determine whether the costs of credit monitoring are recoverable in this case for a significantly increased risk of identity theft, shows that plaintiffs have in fact suffered an injury.”
Plaintiffs offered the expert declaration of Evan D. Hendricks (Hendricks) to the effect that CalPERS’ one-year offer of identity theft monitoring was inadequate, and that the proper remedy was identity theft monitoring for a minimum of five years to life. In addition, plaintiffs argued each class member was entitled to a $2,500 exemplary damage award pursuant to Civil Code section 1798.53, against Graphic and Direct, for the alleged intentional disclosure of their social security numbers.
c. Opposition papers.
Defendants filed joint opposition papers to the motion for class certification. Defendants argued no California court had recognized credit monitoring as a form of compensable damages.
Further, even assuming credit monitoring were an appropriate remedy, the alleged need for credit monitoring was not subject to common proof – the risk of increased identity theft and the need for credit monitoring would require a case-by-case risk assessment for each proposed class member. The opposition papers relied on the expert declaration of Hendricks, the plaintiffs’ expert, for the following points: mail thieves are less active in rural areas than in suburban areas; apartment complexes or gated communities are at lower risk of mail theft than other residential housing; installing a locked mailbox and tearing up discarded mail lowers mail theft risk; and those who follow tips on avoiding identity theft, such as routinely reviewing their bank and credit card statements, are at lower risk of identity theft.
Further, Scott and Robitaille were not “adequate representatives – both refused free credit monitoring when offered and neither is interested in pursuing it as a remedy in this attorney-driven litigation. If other retirees did in fact have claims to bring, consolidation would be far superior to class action.”
“Fortunately, the August 2007 mailing that gave rise to this suit caused no actual injury to any CalPERS retiree. Plaintiffs Scott and Robitaille concede they can point to no concrete harm to themselves or any putative class member. CalPERS took immediate action, notified every retiree whose Social Security Number had been printed on an August 2007 brochure, and greatly improved its procedures for securing personal information sent outside its walls. It also offered every retiree a year of free credit monitoring and identity theft insurance. [¶] Scott and Robitaille refused CalPERS’s free credit monitoring offer. But now, they come to court asking to represent their fellow retirees in seeking only one type of compensatory damages: credit monitoring. They claim no other general or special damages for themselves and waive all emotional or personal injury claims by the putative class of retirees.”
Defendants further argued common questions did not predominate, even if credit monitoring were an available remedy, because no retiree would be able to recover without an individualized showing as to his or her preexisting risk of identity theft as well as any increase in his or her risk in light of the August 2007 brochure.
Defendants also asserted the August 2007 mailing presented a low risk of identity theft because it was a one-time event for each retiree, dispersed through the postal system and delivered on a single day. As evidenced by the absence of any known identity theft resulting from this event, the risk was miniscule that any given brochures were intercepted, stolen from the trash, and having the unhyphenated and unspaced digits recognized by a thief as a social security number. Also, any identity theft, if it occurred, would have occurred within a few months of the August 2007 mailing, well within the one-year’s worth of free credit monitoring offered by CalPERS.
Finally, with respect to the issue of superiority, “[n]o benefit will come from certifying this case, which despite attempts to disguise, resembles a personal injury suit best handled through consolidation.” Class treatment “must be the ‘superior method’ of resolving the case and of ‘substantial benefit’ to the court and proposed class. [Citation.] Here it would be neither. Scott and Robitaille renounce personal injury claims. But their proposed analogy to medical monitoring highlights the similarities to a mass tort case, better managed by consolidation.... [¶] Likewise, Scott’s and Robitaille’s credit monitoring theory raises so many individual issues as to negate any substantial benefit a class action might otherwise bring.”
d. Trial court’s ruling.
On September 14, 2009, after taking the matter under submission, the trial court adopted its tentative ruling as its final decision and issued an extensive written ruling denying plaintiff’s motion for class certification in its entirety.
The trial court found common questions predominated under the UCL claim, the Civil Code section 1798 claim and the Government Code section 20230 claim. However, with respect to all four causes of action (i.e., the three statutory claims and the negligence claim), the trial court denied certification for lack of superiority. With respect to the negligence claim, the trial court denied certification on the additional ground that common questions did not predominate.
In finding common questions did not predominate as to the negligence claim, the trial court reasoned as follows: (1) whether defendants owed a duty to the putative class members; and (2) whether they breached that duty, were common questions. However, those questions did not predominate – the negligence claim raised further questions as to causation and damages, which could not be proved on a classwide basis.
In finding a lack of superiority as to all four causes of action, the trial court reasoned: “First, class adjudication is not superior, as least to the Negligence claim, in that common questions do not predominate. Rather th[a]n the matter being litigated through common proof for all the putative class members, the trial would turn into multipl[e] mini-trials for the 391, 000 members.
“Second, the evidence indicates that even if the matter is adjudicated on a class-wide basis – other than the statutory imposed damages and possibly allowance of future monitoring – the class members have suffered no cognizable harm. The putative class members receive no benefit out of this litigation. In fact, the majority of the putative class members would likely not be interested in accepting the future monitoring. Of the 391, 000 retirees, only 49, 000 members accepted CalPERS’s offer for one-year free monitoring service. That is only 12.5 % of the putative class members. Thus, there is a likelihood that even if Plaintiffs prevail, the putative class members would not step forward to recover. Also, Defendants receive no benefit here; rather they incur unnecessary costs and expenses to adjudicate a matter where no known putative class members have suffered any actual harm, i.e., actually had their identity stolen. The only ‘party’ to benefit from class adjudication may be Class Counsel who if prevail are entitled to their attorney fees.
“Third, Plaintiffs argue that they should be entitled to recover the costs for identity theft monitoring. However, Plaintiffs refused Defendant CalPERS’ offer for one-year free service and testified to no real interest in such monitoring service. Maybe those class members who paid for additional monitoring service after the one-year free offer are entitled to recovery [of] their costs, but Plaintiffs do not represent such a class as they themselves have incurred no such costs and do not intend to.
“Finally, class adjudication is not superior method of resolving the claims herein in that the class members may have an interest in controlling his/her own case so can assert damages for any emotional distress and/or mental anguish that resulted from the disclosure of his/her [social security number].” (Italics added.)
On October 20, 2009, plaintiffs filed a timely notice of appeal from the September 14, 2009 order denying their motion for class certification.
CONTENTIONS
Plaintiffs contend (1) the trial court abused its discretion because it failed to consider the substantial class benefits that exist pursuant to Business and Professions Code section 17206 and Civil Code section 1798.53; and (2) common questions predominate regarding their claim for negligence against CalPERS because the claim is based upon a statutory violation.
DISCUSSION
1. General principles.
a. Criteria for class certification.
Code of Civil Procedure section 382 authorizes class actions “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court....” (Code Civ. Proc., § 382.)
The certification question is essentially a procedural one that does not ask whether an action is legally or factually meritorious. (Sav-On, supra, 34 Cal.4th at p. 326.)
“To obtain certification, a party must establish the existence of both an ascertainable class and a well-defined community of interest among the class members.” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435 (Linder).) The “community of interest requirement involves three factors: ‘(1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.’ [Citation.]” (Ibid., italics added.)
An additional factor in determining whether a class should be certified is the “superiority” criterion. The moving party must establish “ ‘by a preponderance of the evidence that the class action proceeding is superior to alternate means for a fair and efficient adjudication of the litigation.’ ” (Sav-On, supra, 34 Cal.4th at p. 332, italics added.) A trial court ruling on a certification motion determines whether the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants. (Id. at p. 326.) The relevant comparison lies between the costs and benefits of adjudicating plaintiffs’ claims in a class action and the costs and benefits of proceeding by numerous separate actions. (Id. at p. 339, fn. 10.)
In deciding “whether a class action would be superior to individual lawsuits, ‘the court will usually consider [four factors]: [¶] [(1)] The interest of each member in controlling his or her own case personally; [¶] [(2)] The difficulties, if any, that are likely to be encountered in managing a class action; [¶] [(3)] The nature and extent of any litigation by individual class members already in progress involving the same controversy; [and] [¶] [(4)] The desirability of consolidating all claims in a single action before a single court.’ ” (Basurco v. 21st Century Ins. Co. (2003) 108 Cal.App.4th 110, 121.)
“Other relevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing. [Citation.]” (Linder, supra, 23 Cal.4th at p. 435.)
b. Standard of appellate review.
The trial court is generally afforded great latitude in granting or denying class certification, and we normally review a ruling on certification for an abuse of discretion. (Sav-On, supra, 34 Cal.4th at pp. 326-327.) A trial court ruling supported by substantial evidence generally will not be disturbed unless (1) improper criteria were used, or (2) erroneous legal assumptions were made. (Ibid.)
As the focus “in a certification dispute is on what type of questions – common or individual – are likely to arise in the action, rather than on the merits of the case [citations], in determining whether there is substantial evidence to support a trial court’s certification order, we consider whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment. [Citations.] ‘Reviewing courts consistently look to the allegations of the complaint and the declarations of attorneys representing the plaintiff class to resolve this question.’ [Citations.]” (Sav-On, supra, 34 Cal.4th at p. 327.)
The reviewing court must examine the trial court’s stated reasons for denying class certification. (Linder, supra, 23 Cal.4th at p. 436.) “Ordinarily, appellate review is not concerned with the trial court’s reasoning but only with whether the result was correct or incorrect. [Citation.] But on appeal from the denial of class certification, we review the reasons given by the trial court for denial of class certification, and ignore any unexpressed grounds that might support denial. [Citation.] We may not reverse, however, simply because some of the court’s reasoning was faulty, so long as any of the stated reasons are sufficient to justify the order. [Citation.]” (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 843-844.) Any valid pertinent reason stated will be sufficient to uphold the order. (Sav-On, supra, 34 Cal.4that p. 327.)
2. Our review of trial court’s rationale compels affirmance.
As discussed above, our role is to review the trial court’s stated reasons for denying class certification. (Linder, supra, 23 Cal.4th at p. 436.)
Here, the trial court’s reasons for its denial order including the following: “Plaintiffs argue that they should be entitled to recover the costs for identity theft monitoring. However, Plaintiffs refused Defendant CalPERS’ offer for one-year free service and testified to no real interest in such monitoring service. Maybe those class members who paid for additional monitoring service after the one-year free offer are entitled to recovery [of] their costs, but Plaintiffs do not represent such a class as they themselves have incurred no such costs and do not intend to.” (Italics added.)
As indicated, to obtain certification, the plaintiffs must establish they have “ ‘claims or defenses typical of the class’ ” and that they can adequately represent the class. (Linder, supra, 23 Cal.4th at p. 435.) Here, the record supports the trial court’s determination that plaintiffs fail to meet these criteria.
As indicated, the plaintiffs contended CalPERS’s one-year offer of identity theft monitoring was insufficient and they purported to seek identity theft monitoring for five years to life on behalf of the putative class. However, both Scott and Robitaille declined CalPERS’s offer of a year’s worth of free credit monitoring services and identity theft insurance.
Scott’s deposition testimony was that he views such services as “add-ons, ” benefiting the seller but offering no real protection. Besides, Scott’s bank already provided him with routine credit monitoring as part of his checking account services.
As for Robitaille, he stated in his deposition that he prefers to check his own credit rather than taking advantage of credit monitoring and identity theft insurance. Robitaille had been a victim of identity theft in the past, prior to the August 2007 mailing, and since then he monitors his own accounts very closely.
Because Scott and Robitaille both eschew credit monitoring services as a means of preventing identity theft, they do not have claims typical of the class which they seek to represent. Therefore, the trial court properly denied their motion for class certification.
As indicated, any valid pertinent reason stated by the trial court will be sufficient to affirm the order denying class certification. (Sav-On, supra, 34 Cal.4that p. 327.) Therefore, it is unnecessary to address any remaining issues.
DISPOSITION
The order denying class certification is affirmed. The parties shall bear their respective costs on appeal.
We concur: CROSKEY, J., KITCHING, J.