Free Order on Motion to Strike - District Court of California - California

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ORDER - 1

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA UTILITY CONSUMERS' ACTION NETWORK and ERIC TAYLOR, on behalf of themselves, their members and/or all others similarly situated, as applicable,, Plaintiffs, v. SPRINT SOLUTIONS, INC. and SPRINT SPECTRUM L.P.; Defendants. This matter comes before the Court on the parties' responses (Dkts. 38 and 39) to the order to show cause (Dkt. 37) and Defendants' Motion to Strike Plaintiffs' Second Amended Complaint (Dkt. 31-2). The Court has considered the pleadings filed in support of and in opposition to the motion and the remainder of the file herein. I. FACTUAL AND PROCEDURAL BACKGROUND On November 21, 2007, plaintiffs Utility Consumers' Action Network ("UCAN") and Eric Taylor filed a civil action against defendants Sprint Solutions, Inc., Sprint Spectrum L.P., and Sprint-Nextel Corporation. Dkt. 1. On January 2, 2008, the plaintiffs filed an amended complaint, alleging that the defendants improperly included taxes, fees, and other charges on monthly

CASE NO. C07-2231RJB ORDER ON RESPONSES TO ORDER TO SHOW CAUSE AND GRANTING IN PART AND DENYING IN PART MOTION TO STRIKE

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1 invoices to customers who obtained data service or data card plans, and improperly charged these 2 customers for text messages. Dkt. 9. 3 On January 23, 2007, Sprint filed a motion to dismiss the amended complaint for failure to

4 state a claim upon which relief may be granted and moved to strike certain portions of the 5 amended complaint. Dkt. 12. The motion was granted in part and denied in part. Dkt. 27. 6 Notably, the Court held that the "Plaintiffs should be required to provide a more definite 7 statement, connecting facts with violations of the specific sections of the [Federal 8 Communications Act ("FCA")], and the basis upon which plaintiffs are claiming that those facts 9 violate the FCA." Id. at 10. Accordingly, the Court ordered the plaintiffs to "provide, forthwith, a 10 more definite statement, connecting facts with violations of the specific sections of the FCA, and 11 the basis upon which plaintiffs are claiming that those facts violate the FCA." Id. at 13. 12 On April 29, 2008, the parties jointly moved for an order allowing the plaintiffs to file a

13 second amended complaint on or before May 9, 2008, and the motion was granted. Dkt. 28; Dkt. 14 29. The motion requested additional time for the filing of a second amended complaint but did not 15 apprise the Court of the proposed amendment and did not seek leave to include additional claims 16 or theories. Defendants complain about the second amended complaint on those grounds. It 17 appears to the Court that these issues are more a misunderstanding than a prejudicial rule 18 violation. The second amended complaint should be accepted by the Court in its present form, 19 subject to the rulings herein on Defendants' Motion to Strike. 20 On May 9, 2009, the plaintiffs filed a second amended complaint. The second amended

21 complaint names only Sprint Solutions, Inc. and Sprint Spectrum L.P. (collectively "Sprint"). On 22 May 23, 2008, Sprint moved to strike portions of the second amended complaint, contending that 23 the second amended complaint contains references to claims previously dismissed and contains 24 new claims. Dkt. 31. Sprint also moved to dismiss the fifth cause of action in the second amended 25 complaint. Dkt. 32. 26 On July 10, 2008, the Court granted the motion to dismiss the fifth cause of action. Dkt.

27 37. The Court noted that the fifth cause of action was the only federal claim and required the 28
ORDER - 2

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1 parties to show cause "why this Court either has original jurisdiction and/or why this court should 2 assume or decline federal jurisdiction over the remaining claims in this action." Id. at 8. The Court 3 reserved consideration on the motion to strike pending the Court's determination of whether the 4 Court has, and will retain, jurisdiction over this action. Id. 5 6 II. DISCUSSION Matters raised in the Court's order to show cause and the motion to strike are now ripe

7 for decision. 8 A. 9 JURISDICTION The parties have responded to the Court's order and are in agreement as to this Court's

10 subject matter jurisdiction. See Dkt. 38; Dkt. 39. Subject matter jurisdiction is an issue that may 11 be raised by the Court sua sponte and is not subject to waiver or stipulation. See, e.g., Fed. R. 12 Civ. P. 12(h)(3). Accordingly, the Court's analysis considers, but is independent of, the parties' 13 positions on the issue. 14 The plaintiffs contend that the Class Action Fairness Act, 28 U.S.C. § 1332(d) ("the

15 CAFA"), vests the Court with jurisdiction. Dkt. 38 at 2; see also Dkt. 30 at 3-4. The CAFA 16 provides subject matter jurisdiction over class actions if (1) the class comprises more than 100 17 members, (2) there is minimal diversity of citizenship, and (3) the aggregate amount of all class 18 members' claims exceeds $5 million. See 28 U.S.C. § 1332(d)(2), (5)(B). The CAFA provides, in 19 part, as follows: 20 21 22 23 24 (2) The district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which-(A) any member of a class of plaintiffs is a citizen of a State different from any defendant; (B) any member of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or (C) any member of a class of plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject of a foreign state.

25 28 U.S.C. § 1332(d)(2). 26 In this case, the plaintiffs' allegations are sufficient to establish jurisdiction under the

27 CAFA. First, UCAN is comprised of 30,000 members, and the plaintiffs seek to certify a class 28
ORDER - 3

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1 comprised of all of Sprint's similarly situated customers throughout the country. The proposed 2 class therefore likely comprises more than 100 members. 3 Second, at least minimal diversity between the class members and the defendants is

4 alleged. The plaintiffs are alleged to be residents of California, and the defendants are alleged to 5 be Delaware entities with "primary address[es] in Kansas." Dkt. 30 at 5. The plaintiffs bring suit 6 on behalf of themselves and a class of similarly situated "individual persons or entities in 7 California and all other states as the Court may deem to be appropriate." Dkt. 30 at 6. The 8 plaintiff's allegations satisfy the minimal diversity requirement. 9 Finally, the parties do not dispute that the aggregate amount of all class members' claims

10 exceeds $5 million. For example, the plaintiffs contend that their damages amount to several 11 dollars per month and that if Sprint imposes its charges uniformly, the class damages amount to 12 millions of dollars. Id. at 14. The Court therefore concludes that the plaintiffs' allegations, at this 13 stage of the proceeding, are sufficient to establish jurisdiction under the CAFA. 14 Under certain circumstances, the Court may, in the interests of justice and after

15 considering the totality of the circumstances, decline jurisdiction over a class action if more than 16 one-third but less than two-thirds of the class members and the primary defendants are citizens of 17 the state in which the action was originally filed. 28 U.S.C. § 1332(d)(3). There are also 18 circumstances in which the CAFA requires the Court to decline to exercise jurisdiction. 28 19 U.S.C. § 1332(d)(4). Based upon the record established thus far, it appears that minimal diversity 20 is present and that the Court should not decline jurisdiction under Section 1332(d)(3) or (4). 21 Because the CAFA's jurisdictional requirements necessarily depend upon the facts of a

22 particular case, further development of the factual record may warrant an additional inquiry into 23 the basis for the Court's jurisdiction and whether declining jurisdiction would be prudent. At this 24 juncture, it appears that the plaintiffs have established the requisite factual basis for the Court's 25 exercise of jurisdiction pursuant to the CAFA. 26 B. 27 28
ORDER - 4

MOTION TO STRIKE

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Motions to strike are governed by Federal Rule of Civil Procedure 12(f), which provides

2 as follows: 3 4 5 6 7 Fed. R. Civ. P. 12(f). Sprint moves to strike several portions of the second amended complaint on 8 the grounds that they are immaterial and impertinent. Dkt. 31-2 at 5. 9 First, Sprint moves to strike references to "exemplary damages." Dkt. 31-2 at 5. Counsel 10 for both parties conferred, and the plaintiffs' counsel has clarified that exemplary damages are 11 sought only for the alleged violations of the FCA and California Public Utilities Code § 2890(a), 12 which provides that "telephone bill[s] may only contain charges for products or services, the 13 purchase of which the subscriber has authorized." Id. at 7; see also Dkt. 30 at 29 (Plaintiffs' 14 "cramming" claim). Sprint nevertheless moves to strike on the grounds that it is unclear from the 15 face of the complaint that the plaintiffs are not seeking exemplary damages for their Consumer 16 Legal Remedies Act ("CLRA") claim and that the plaintiffs cannot recover exemplary damages 17 for their FCA and cramming claims. Dkt. 31-2 at 7. As the plaintiffs' FCA claim has been 18 dismissed (Dkt. 37), the only alleged basis for recovering exemplary damages is the plaintiffs' 19 cramming claim. 20 The plaintiffs' contention that they are entitled to exemplary damages on their cramming 21 claim is new. The first and second amended complaints contain references to exemplary damages 22 that are not specific to any particular claim. See, e.g., Dkt. 30 at 7 ("Plaintiffs seek . . . exemplary 23 and/or statutory damages as set forth more fully below to the extent they are entitled to such relief 24 under the law."). On January 23, 2008, Sprint moved to strike the plaintiff's request for 25 exemplary damages in the first amended complaint: 26 27 28
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(f) Motion to Strike. The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. The court may act: (1) on its own; or (2) on motion made by a party either before responding to the pleading or, if a response is not allowed, within 20 days after being served with the pleading.

Plaintiffs' First Amended Complaint includes a request for punitive damages. The request is made in ¶ ¶ 61 and 79 and in the Prayer for Relief at ¶ 3. The only causes of action potentially giving rise to a prayer for punitive

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damages are Plaintiffs' third cause of action for violations of the CLRA and Plaintiffs' seventh cause of action for conversion. No other cause of action alleged provides a basis for punitive damages. Because Plaintiffs cannot maintain an action for damages due to a violation of Civil Code § 1782(a) and have failed to state a cause of action for conversion, Plaintiffs' prayer for punitive damages should be stricken. Dkt. 12-2 at 18 (emphasis added). In opposing the motion to strike, the plaintiffs contended that

5 the request for exemplary damages should survive because their CLRA and conversion claims 6 were not subject to dismissal: "Finally, the motion to strike the claim for punitive damages is 7 based solely on the assumption Sprint is correct about both the CLRA claim and the conversion 8 claim. As it is wrong about both for the reasons set forth above, the punitive damages allegations 9 are properly alleged." Dkt. 18 at 19. In other words, the plaintiffs did not dispute that they were 10 seeking exemplary damages only on their CLRA and conversion claims. Accordingly, the Court 11 dismissed the request for exemplary damages. Dkt. 27 at 12-13. The plaintiffs were afforded a 12 full and fair opportunity to oppose dismissal of their exemplary damages request on the grounds 13 that their cramming claim provides for exemplary damages but failed to do so. Therefore, the 14 Court should grant the motion to strike as to the second amended complaint's reference to 15 exemplary damages. 16 Second, Sprint moves to strike the second amended complaint's reference to "statutory" 17 damages under the CLRA on the grounds that this claim has been dismissed. Dkt. 31-2 at 5; Dkt. 18 27 at 12 ("Sprint's motion to dismiss plaintiffs' CLRA claim for damages is GRANTED. The 19 CLRA claim for damages is DISMISSED on the basis that plaintiffs did not comply with the 20 prefiling notice requirements of Cal.Civ.Code, § 1782 (a), and the claim for damages in ¶ 61 of 21 the amended complaint is STRICKEN."). Specifically, Sprint moves to strike paragraphs 66 and 22 67 from the second amended complaint. In paragraph 66, the plaintiffs allege their compliance 23 with California Civil Code § 1782's notice requirement, an allegation that also appeared in the 24 first amended complaint. This allegation is in direct contravention of the Court's prior ruling. 25 Dkt. 27 at 9 ("plaintiffs did not comply with the prefiling notice requirements of Cal.Civ.Code, § 26 1782."). Accordingly, the plaintiffs should not be permitted to relitigate this issue, and the 27 motion to strike paragraph 66 should be granted. 28
ORDER - 6

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With respect to paragraph 67, Sprint disputes the inclusion of the following: "Plaintiff

2 Taylor hereby preserves the right to later seek an award of all actual and exemplary damages 3 permitted for violation fo the CLRA, including for statutory damages of $1,000 and/or up to 4 $5,000 per consumer who qualifies as a `senior citizen' under the CLRA." Dkt. 30 at 23-24. The 5 Court's prior rulings did not address the right to "later seek" damages under the CLRA, and the 6 Court should therefore decline to strike this language. The Court's rulings striking references to 7 exemplary and statutory damages is without prejudice to evidentiary offers and to future motions 8 should the plaintiffs be able to establish that they have some right to "later seek" such damages. 9 Third, Sprint moves to strike allegations that UCAN suffered an injury. Dkt. 31-2 at 8.

10 The first amended complaint's allegations regarding injuries suffered by UCAN are as follows: 11 12 13 Dkt. 9 at 4. The Court held that these allegations were insufficient as follows: 14 15 16 17 18 19 Dkt. 26 at 4. 20 In the second amended complaint, the plaintiffs apparently seek to cure this deficiency 21 with substantially similar allegations: 22 23 24 25 Dkt. 30 at 4 (emphasis added); see also Dkt. 30 at 2 ("either it or one of its members have lost 26 money); Fed. R. Civ. P. 15(a)(2). The Court has already determined that these factual allegations 27 are insufficient to establish UCAN's standing to sue on its own behalf, and the Court should not 28
ORDER - 7

UCAN has lost and diverted staff time and resources from other clients and causes investigating the claims asserted herein and in an attempt to resolve the allegations at issue herein. UCAN brings this action on behalf of its members and seeks all such remedies that it is entitled to in that capacity.

In this case, UCAN has not alleged a sufficient injury in fact, fairly traceable to Sprint's conduct, sufficient to satisfy the requirements for Article III standing. The allegedly unlawful charges at issue were made on bills between Sprint and its customers. UCAN has not alleged a direct relationship between that organization and Sprint. UCAN's decision to expend resources to investigate Sprint's conduct­conduct related to individuals who were Sprint's customers­is an attempt to bootstrap its costs onto claims of its members. UCAN has not shown that it has suffered injury in fact sufficient to establish Article III standing.

UCAN has lost and diverted staff time and resources from other clients and causes investigating the claims asserted herein and in an attempt to resolve the allegations at issue herein. UCAN thus brings this action acting on behalf of itself and its members and seeks all such remedies that it is entitled to in that capacity.

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1 permit the plaintiffs to contravene this holding. Accordingly, Sprint's motion to strike UCAN's 2 allegation that it is suing on its own behalf should be granted. 3 Fourth, Sprint moves to strike all allegations regarding "regulatory" and "administrative"

4 charges and allegations regarding a new sub-class. Dkt. 31-2 at 10. Sprint contends that these 5 allegations are unrelated to allegations in earlier versions of the complaint and should be stricken 6 for the plaintiffs' failure to obtain leave of court to allege new claims or theories. Sprint similarly 7 contends that allegations regarding Ms. Sherman and Ms. Friedrich should be stricken because 8 the plaintiffs do not allege that these individuals are data card customers. Id. at 11. Sprint also 9 contends that the plaintiffs fail to identify a class representative for the new sub-class. Id. 10 Sprint offers no substantive basis for striking these new allegations, asserts no prejudice

11 stemming from the amendment, and does not contend that the plaintiffs should be denied leave to 12 include these new allegations. Whether the new sub-class is represented by the named plaintiffs is 13 an issue better addressed at the class certification stage. Accordingly, the Court should decline to 14 strike these allegations. In future filings, the Court expects counsel to fully comply with the 15 Federal Rules of Civil Procedure to avoid such misunderstandings about the scope of a motion or 16 order. 17 C. 18 STATUS CONFERENCE In a footnote in the response, the plaintiffs ask the Court to conduct an Early Neutral

19 Evaluation under Local Rule 16.1(c) or a Case Management Conference under Federal Rule of 20 Civil Procedure 16(b). Dkt. 33 at 3 n.1. This request was not made by motion as any request for 21 action by the Court should be made. 22 Nevertheless, a status conference is warranted. See Dkt. 24 (letter indicating Court's

23 intention to conduct status conference after ruling on pending motions). The original complaint 24 was filed on November 21, 2007, and has undergone two amendments. Dkt. 1; Dkt. 9; Dkt. 30. 25 The pleadings are now sufficiently clear, the second amended complaint should serve as the 26 operative complaint, and this matter should proceed through the remainder of the pretrial phase. 27 28
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Accordingly, the Court will conduct a telephonic status and scheduling conference on

2 August 29, 2008, at 9:30 a.m. Before the conference, counsel for the parties shall confer 3 pursuant to Federal Rule of Civil Procedure 26(f). At that time, the parties should be prepared to 4 discuss the following: 5 6 2. 7 8 9 10 11 5. 12 6. 13 7. 14 8. 15 16 III. ORDER 17 Therefore, it is hereby 18 ORDERED that Defendants' Motion to Strike Plaintiffs' Second Amended Complaint 19 (Dkt. 31-2) is GRANTED in part and DENIED in part as provided herein, and the Court will 20 conduct a telephonic status conference on August 29, 2008 at 9:30 a.m. 21
DATED this 15th day of August, 2008.

1.

The date on which Federal rule of Civil Procedure 26(a) initial disclosures took place or will take place. Whether precertification discovery should be limited to matters bearing on certification of this matter as a class action. Whether the case should be bifurcated by deciding class certification before any substantive issues in the case and/or by trying the liability issues before the damages issues. A proposed filing deadline and briefing schedule for the class certification motion. A proposed discovery plan. The date the case will be ready for trial. The total number of trial days required. The dates on which trial counsel may have complications to be considered in setting a trial date.

3.

4.

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ORDER - 9

A
ROBERT J. BRYAN United States District Judge