Court Opinion

ID: 4403591
Source: CourtListenerOpinion
Date Created: 2019-06-05 17:00:31.113136+00
Date Added: 2024-06-11T09:24:44.299047
License: Public Domain

FOR PUBLICATION

        UNITED STATES COURT OF APPEALS
             FOR THE NINTH CIRCUIT

 NEI CONTRACTING AND                               No. 16-56498
 ENGINEERING, INC., on Behalf of
 Itself and All Others Similarly                     D.C. No.
 Situated,                                        3:12-cv-01685-
                   Plaintiff-Appellant,              BAS-JLB

                      v.
                                                      OPINION
 HANSON AGGREGATES PACIFIC
 SOUTHWEST, INC., a Delaware
 Corporation; HANSON AGGREGATES,
 INC.; LEHIGH HANSON, CO.,
               Defendants-Appellees.

        Appeal from the United States District Court
           for the Southern District of California
        Cynthia A. Bashant, District Judge, Presiding

         Argued and Submitted November 15, 2018
                   Pasadena, California

                           Filed June 5, 2019

  Before: Richard A. Paez and Richard R. Clifton, Circuit
      Judges, and Sharon L. Gleason,* District Judge.

                   Opinion by Judge Gleason

    *
      The Honorable Sharon L. Gleason, United States District Judge for
the District of Alaska, sitting by designation.
2                 NEI V. HANSON AGGREGATES

                            SUMMARY**

                 Class Certification / Standing

    The panel affirmed the district court’s order decertifying
a class of persons where the class representative lacked
standing as to its individual claim.

    The district court decertified a plaintiff class of cellular
phone users whose calls were recorded purportedly without
their consent by defendant on the ground that the class did not
satisfy Fed. R. Civ. P. 23(b)(3)’s predominance requirement.
Subsequently, the district court held that the lead plaintiff
lacked standing to bring its California Invasion of Privacy
Act claim against defendant.

    The panel held that this case presented a threshold
standing issue. The panel held that a class must be decertified
when the class representatives are found to lack standing as
to their individual claims. Furthermore, by failing to
challenge the district court’s standing determination, plaintiff
had waived its right to challenge that determination. The
panel further held that neither mootness exception raised by
plaintiff stood for the proposition that a class could be
certified if the class representative lacked standing as to its
individual claim.

    **
       This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
               NEI V. HANSON AGGREGATES                     3

                        COUNSEL

Janice R. Mazur (argued), Mazur & Mazur, El Cajon,
California; Douglas J. Campion, Law Offices of Douglas J.
Campion APC, San Diego, California; Richard E. Grey, Grey
Law Group APC, El Cajon, California; for Plaintiff-
Appellant.

Fred R. Puglisi (argued), Jay T. Ramsey, and Valerie E. Alter,
Sheppard Mullin Richter & Hampton LLP, Los Angeles,
California; for Defendants-Appellees.

                         OPINION

GLEASON, District Judge:

                    I. BACKGROUND

    NEI Contracting and Engineering, Inc. (“NEI”) was a
longtime customer of concrete supplier Hanson Aggregates,
Inc. (“Hanson”). Like Hanson’s other customers, NEI placed
orders for Hanson’s products by calling into a dedicated
telephone order line. The order line connected callers to a
call directory system that allowed customers to route their
call. Two of the potential routes were Hanson’s “Ready Mix
Dispatch” line and its “Aggregate Dispatch” line. Hanson
recorded all customer calls that were directed to these two
dispatch lines.

    On July 15, 2009, Hanson began using an “Oaisys
Talkument” phone system. When this system was in place,
callers to the two dispatch lines heard a pre-recorded verbal
admonition stating that calls “may be monitored for quality
4                 NEI V. HANSON AGGREGATES

assurance.” It did not inform the caller that the call was being
recorded.

    In 2011 and 2012, NEI and Hanson litigated a billing
dispute arising from orders NEI had placed using the dispatch
lines. During that litigation, Hanson produced recordings of
calls that NEI had placed to the dispatch lines. The litigation
settled in May 2012 in Hanson’s favor.

     On July 6, 2012, NEI initiated this suit against Hanson
under California’s Invasion of Privacy Act (“CIPA”). NEI’s
initial complaint alleged that Hanson had violated California
Penal Code § 632, which prohibits the unauthorized
connection to or recording of confidential communications.1
On October 29, 2013, NEI filed a Second Amended
Complaint (“SAC”). The SAC abandoned the § 632 claim
and instead brought a claim for relief under § 632.7, alleging
that Hanson had recorded NEI’s cell phone calls without its
consent.2 The SAC alleged that Hansen had recorded at least

    1
       In relevant part, § 632 states: “A person who, intentionally and
without the consent of all parties to a confidential communication, uses .
. . [a] recording device to eavesdrop upon or record the confidential
communication, whether the communication is carried on among the
parties in the presence of one another or by means of a telegraph,
telephone, or other device, except a radio, shall be punished by a fine not
exceeding two thousand five hundred dollars ($2,500) per violation, or
imprisonment in a county jail not exceeding one year, or in the state
prison, or by both that fine and imprisonment.”
    2
      In relevant part, § 632.7(a) states: “Every person who, without the
consent of all parties to a communication, . . . records . . . a
communication transmitted between two cellular radio telephones, a
cellular radio telephone and a landline telephone, two cordless telephones,
a cordless telephone and a landline telephone, or a cordless telephone and
a cellular radio telephone, shall be punished by a fine not exceeding two
                   NEI V. HANSON AGGREGATES                                5

45 cell phone calls that NEI had placed to the dispatch lines.
NEI sought $5,000 in statutory damages for each violation of
the statute,3 injunctive relief, and class certification.

    On December 23, 2013, Hanson changed the recorded
admonition on its dispatch lines. The updated recording
stated that calls “may be monitored or recorded for quality
assurance purposes.” Following that change, NEI defined its
proposed class as:

         All persons who called Defendant with a
         cellular telephone and selected the Aggregate
         or Ready Mix Dispatch lines through
         Defendant’s telephone system, whose calls
         were recorded by Defendant, during the time
         period beginning July 15, 2009, and
         continuing through December 23, 2013.

    Hanson opposed certification, asserting that the proposed
class would not meet Federal Rule of Civil
Procedure 23(b)(3)’s predominance requirement because
there would need to be individualized determinations made as
to whether each class member had consented to being
recorded. The district court initially concluded that the

thousand five hundred dollars ($2,500), or by imprisonment in a county
jail not exceeding one year, or in the state prison, or by both that fine and
imprisonment.”
    3
      In relevant part, California Penal Code § 637.2 states: “Any person
who has been injured by a violation of this chapter may bring an action
against the person who committed the violation for the greater of the
following amounts: (1) Five thousand dollars ($5,000) per violation[;]
(2) Three times the amount of actual damages, if any, sustained by the
plaintiff.”
6              NEI V. HANSON AGGREGATES

predominance requirement was not satisfied, and denied class
certification. NEI moved for reconsideration and provided
new evidence regarding the timing of certain recorded
conversations. Based on this information, the court certified
the class.     Following certification, however, Hanson
identified nine customers who had actual knowledge of
Hanson’s recording practice during the class period and
continued to place orders with Hanson. Hanson moved to
decertify the class, citing these nine customers as evidence
that Rule 23's “commonality” and “predominance”
requirements were not satisfied. Concluding that the
predominance requirement had not been satisfied, the district
court decertified the class on May 6, 2016.

     Following decertification, NEI proceeded towards a
bench trial on its individual claim with respect to 44 cell
phone calls. Shortly before trial, the district court granted
Hanson’s motion in limine to preclude NEI’s corporate
representative from testifying about employees’ knowledge
of call recording as inadmissible hearsay. On the morning of
trial, NEI informed the court that it would only be pursuing
claims based on a single call.

    On September 15, 2016, the district court ruled against
NEI on its statutory damages claim. The court also
concluded that NEI lacked standing to seek damages on its
individual claim or injunctive relief:

       [I]n order to establish Article III standing,
       although it need not show actual damages,
       NEI must show that it “suffered ‘an invasion
       of a legally protected interest’ that is ‘concrete
       and particularized’ and ‘actual or imminent,
       not conjectural or hypothetical.’” See Spokeo,
                 NEI V. HANSON AGGREGATES                            7

        Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016)
        (quoting Lujan v. Defenders of Wildlife,
        504 U.S. 555, 560 (1992)). . . . [E]ven if
        Hanson violated CIPA, the Court finds that
        NEI has not suffered a concrete or
        particularized injury by the violation.
        Accordingly, NEI lacks standing to pursue its
        claim under CIPA in this Court. See Spokeo,
        136 S. Ct. 1540 at 1547; see also Lujan,
        504 U.S. at 559–61.

    NEI appeals the class decertification order.4 It does not
appeal the judgment in Hanson’s favor as to NEI’s individual
claim.

                II. STANDARD OF REVIEW

    A district court’s decertification order is reviewed for
abuse of discretion. See Smith v. Univ. of Washington, Law
Sch., 233 F.3d 1188, 1193 (9th Cir. 2000). “Questions of
standing are . . . reviewed de novo, but underlying factual
findings are reviewed for clear error.” McCormack v.
Herzog, 788 F.3d 1017, 1024 (9th Cir. 2015) (citing
Preminger v. Peake, 552 F.3d 757, 762 n.3 (9th Cir. 2008)).
We have jurisdiction under 28 U.S.C. § 1291.

                       III. DISCUSSION

   The district court decertified the class on the ground that
the class did not satisfy Rule 23(b)(3)’s predominance

    4
      NEI also appeals the denial of its motion for attorneys’ fees. We
address this issue in a memorandum disposition filed concurrently with
this opinion.
8               NEI V. HANSON AGGREGATES

requirement. Subsequently, the district court held that NEI
lacked standing to bring its CIPA claim against Hanson.
NEI’s appeal focuses primarily on whether the district court’s
predominance analysis constituted an abuse of discretion.
But more fundamentally, this case presents a threshold
question: whether a class must be decertified when the class
representative is found to lack standing as to its individual
claims.

    To establish Article III standing, a plaintiff “must have
(1) suffered an injury in fact, (2) that is fairly traceable to the
challenged conduct of the defendant, and (3) that is likely to
be redressed by a favorable judicial decision. Spokeo, Inc. v.
Robins, 136 S. Ct. 1540, 1547 (2016), as revised (May 24,
2016). “To establish injury in fact, a plaintiff must show that
he or she suffered ‘an invasion of a legally protected interest’
that is ‘concrete and particularized’ and ‘actual or imminent,
not conjectural or hypothetical.’” Id. at 1548 (quoting Lujan
v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). In a class
action, this standing inquiry focuses on the class
representatives. “[I]f none of the named plaintiffs purporting
to represent a class establishes the requisite of a case or
controversy with the defendants, none may seek relief on
behalf of himself or any other member of the class.” O’Shea
v. Littleton, 414 U.S. 488, 494 (1974); see also Sierra Club v.
Morton, 405 U.S. 727, 734–35 (1972).

    “[S]tanding is the threshold issue in any suit. If the
individual plaintiff lacks standing, the court need never reach
the class action issue.” Lierboe v. State Farm Mut. Auto. Ins.
Co., 350 F.3d 1018, 1022 (9th Cir. 2003) (quoting 3 HERBERT
B. NEWBERG ON CLASS ACTIONS § 3:19 (4th ed. 2002)). Our
circuit precedent indicates that when a class is certified and
the class representatives are subsequently found to lack
                NEI V. HANSON AGGREGATES                       9

standing, the class should be decertified and the case
dismissed.

    In Lierboe v. State Farm Mutual Auto Insurance Co., the
plaintiff filed a class action asserting that an insurer’s “anti-
stacking” policy violated Montana state law. 350 F.3d at
1020. After the district court certified the class, the Supreme
Court of Montana held — on a certified question — that the
named plaintiff had no claim under state law. Id. at 1021.
We held that because the sole named representative “had no
stacking claim from the outset of her litigation,” the district
court’s class certification order “must be vacated.” Id.
at 1023, 1023 n.6. Similarly, in Williams v. Boeing Co., a
district court decertified a class in part because it found that
the class representatives lacked standing as to their post-2000
claim. 517 F.3d 1120, 1125 (9th Cir. 2008). Similar to this
case, the plaintiffs did not contest the standing determination
on appeal. Id. at 1136. We held that the district court’s
decision to decertify the post-2000 claim class did not
constitute an abuse of discretion “because the named
Plaintiffs concede that they do not have standing with regard
to the post-2000 claim.” Id.

    The principle articulated in Lierboe and Williams is
dispositive here. Following decertification, the district court
held that NEI lacked standing to bring its claim under CIPA.
NEI “only appeals from the district court’s Decertification
Order”; it does not appeal the district court’s standing
determination. As noted above, however, a class must be
decertified when the class representatives are found to lack
standing as to their individual claims. Furthermore, by failing
to address its individual standing on appeal, NEI has waived
the right to challenge the district court’s standing
determination. See Greenwood v. F.A.A., 28 F.3d 971, 977
10              NEI V. HANSON AGGREGATES

(9th Cir. 1994) (“We will not manufacture arguments for an
appellant, and a bare assertion does not preserve a claim,
particularly when, as here, a host of other issues are presented
for review.”).

     NEI maintains it has standing to appeal the decertification
order notwithstanding the adverse judgment against it on the
merits. NEI cites to two exceptions to the mootness doctrine
that may permit a class representative to appeal a
decertification decision even if the representative’s individual
claims have been mooted. First, it is well settled that a class
representative whose individual claim has been mooted but
who retains a “personal stake” in class certification may
appeal a certification decision. See, e.g., Deposit Guar. Nat’l
Bank, Jackson, Miss. v. Roper, 445 U.S. 326, 336, 340
(1980). Second, “[w]hen the claim on the merits is ‘capable
of repetition, yet evading review,’ the named plaintiff may
litigate the class certification issue despite loss of his personal
stake in the outcome of the litigation.” U.S. Parole Comm’n
v. Geraghty, 445 U.S. 388, 398 (1980) (citation omitted).

    Neither of these mootness principles can remedy or
excuse a lack of standing as to the representative’s individual
claims. As to the first exception, our decision in Lierboe is
instructive. We noted there that “[i]f Lierboe initially had a
viable stacking claim that later became moot, then our law in
an appropriate case would permit substituting proper class
representatives to allow the suit to proceed.” 350 F.3d
at 1023 n.6. But because Lierboe “had no stacking claim
from the outset of her litigation,” we held that the district
court’s certification of the class “must be vacated.” Id. at
1023, 1023 n.6. Similarly, in Friends of the Earth, Inc. v.
Laidlaw Environmental Services (TOC), Inc., the Supreme
                  NEI V. HANSON AGGREGATES                             11

Court discussed the relationship between the second
mootness exception and the doctrine of standing:

         [I]f mootness were simply “standing set in a
         time frame,” the exception to mootness for
         acts that are “capable of repetition, yet
         evading review” could not exist. Standing
         admits of no similar exception; if a plaintiff
         lacks standing at the time the action
         commences, the fact that the dispute is
         capable of repetition yet evading review will
         not entitle the complainant to a federal
         judicial forum.

528 U.S. 167, 170 (2000) (citations omitted). Accordingly,
neither mootness exception stands for the proposition that a
class can be certified if the class representative lacked
standing as to its individual claim.

                        IV. CONCLUSION

    The district court concluded that NEI lacked standing and
NEI has waived any argument to the contrary. Given the
class representative’s lack of standing, the trial court did not
abuse its discretion in decertifying the class. We affirm the
district court’s decertification order on this basis. 5

    AFFIRMED.

     5
       Given our resolution of the case, we need not, and do not, reach any
of the other issues presented by the parties.