United States: Decision in NEI Contracting & Eng'g, Inc. v. Hanson Aggregates Pac. Sw. Inc. (Ninth Circuit)

Key Issue

Whether a class must be decertified when the class representative is found to lack standing as to its individual claims.

Background

The plainti, NEI, purported to represent a group of customers who placed orders by phone with the defendant, concrete supplier Hanson Aggregates, and who were recorded without their consent in violation of California's Invasion of Privacy Act ("CIPA").²⁵ To place their orders with Hanson, customers called Hanson's telephone order line, where Hanson recorded all customer calls.

In July 2012, NEI sued Hanson under CIPA, alleging that Hanson recorded NEI's calls without its consent. NEI's complaint sought statutory damages for each recorded call, injunctive relief, and class certication. NEI's proposed class included "[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."²⁶ The district court certied the class, but before trial Hanson successfully moved for decertication on the basis of new evidence showing that the class failed to meet Rule 23(b)(3)'s predominance requirement.

NEI then proceeded to a bench trial on its individual claim. In September 2016, the district court ruled that NEI lacked Article III standing to seek damages or claim injunctive relief. The court found that NEI had not suered a "concrete or particularized injury" as a result of Hanson's actions, even if Hanson had violated CIPA.²⁷

NEI then appealed the class decertifcation order, but not the judgment in Hanson's favor on NEI's individual claim.

Decision

The Ninth Circuit afirmed the district court's order to decertify the class.²⁸ The court did not reach NEI's challenge to the district court's predominance analysis, but instead focused its decision on whether NEI could serve as a class representative despite the district court's unchallenged ruling that NEI lacked standing to bring a claim against the defendant. Citing the Ninth Circuit's prior decision in Lierboe v. State Farm Mutual Auto Insurance Co.,²⁹ the court stated, "[S]tanding is the threshold issue in any suit. If the individual plainti lacks standing, the court need never reach the class action issue."³⁰ Based on this statement of the law, the court held that "when a class is certied and the class representatives are subsequently found to lack standing, the class should be decertied and the case dismissed."³¹

NEI argued that it could serve as class representative despite lacking standing to bring individual claims against Hanson, based on two exceptions to the mootness doctrine. First, NEI argued that class representatives that maintained a "personal stake" in class certification could appeal a certification decision.³² Second, NEI argued that a named plaintiff.

could continue to litigate class certification "[w]hen the claim on the merits is 'capable of repetition, yet evading review.'"³³

The Ninth Circuit rejected NEI's two arguments, finding that neither mootness principle could remedy or excuse NEI's lack of standing for its individual claims. The court distinguished between cases where mootness was an issue—i.e., where a once-viable claim later became moot—and standing cases, where no viable claim existed from the outset.³⁴ In support of this distinction, the Ninth Circuit quoted the Supreme Court's decision in Friends of the Earth, Inc. v. Laidlaw Environmental Services, Inc., stating, "if a plainti 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."³⁵ NEI could not solve a standing problem with mootness arguments.

Thoughts & Takeaways

This case reiterates that a class should be decertified and the case dismissed if the class's representatives are found to lack individual standing to bring claims against the defendant. It also serves as a reminder that mootness and standing are distinct concepts, and arguments that might be eective to cure mootness may have no eect on a standing problem.

Finally, the case is a reminder of the importance of preserving issues for appeal; the apparent strategic decision not to appeal the adverse judgment on NEI's individual claims ended up precluding NEI from serving as class representative.

Read the order here.

Footnotes

25 Cal. Penal Code § 630, et seq.

26 Opinion at 5, NEI Contracting & Eng'g, Inc. v. Hanson Aggregates Pac. Sw., Inc., No. 16-56498 (9th Cir. June 5, 2019), ECF No. 47-1.

27 Id. at 6-7.

28 Id. at 11.

29 350 F.3d 1018, 1022 (9th Cir. 2003).

30 Opinion, supra note 26, at 8.

31 Id. at 8-9.

32 Id. at 10 (citing Deposit Guar. Nat'l Bank of Jackson v. Roper, 445 U.S. 326, 336, 340 (1980)).

33 Id. (citing U.S. Parole Comm'n v. Geraghty, 445 U.S. 388, 398 (1980)).

34 Id.

35 Id. at 11 (citing Friends of the Earth, Inc. v. Laidlaw Envtl. Sers., Inc., 528 U.S. 167, 170).

To view original article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.