Mahboob v. Educational Credit Management Corporation

District Court, S.D. California·Decided March 2, 2021·No. 3:15-cv-00628·Unknown

Opinion

5 Beheshta MAHBOOB, individually and Case No.: 15-cv-0628-TWR-AGS on behalf of all others similarly situated, 6 REPORT AND RECOMMENDATION ON DEFENDANT’S MOTION FOR 7 Plaintiff, RULE 37 SANCTIONS (ECF 185) 8 v. AND PLAINTIFF’S REQUEST FOR RULE 11 SANCTIONS (ECF 189) 9 EDUCATIONAL CREDIT 11 Defendant. 12

13 With the aid of confidential discovery materials, plaintiff’s counsel reached out to 14 this case’s current representative plaintiff. This contact, defendant argues, violated a 15 protective order and the California Rules of Professional Conduct on solicitation. In 16 addition, defendant alleges that plaintiff’s counsel committed violations by bringing a 17 separate lawsuit in another district with this same plaintiff. Plaintiff deems these allegations 18 frivolous and demands Rule 11 sanctions against defense counsel. 20 In this putative class action, plaintiff alleges that Educational Credit Management 21 Corporation recorded phone calls without consent. (ECF 1, at 2.) ECMC contends that at 22 the start of every phone call, it played the automated warning, “This call is being recorded.” 23 (ECF 80, at 7.) Thus, callers who stayed on the line implicitly consented to the recording. 24 Yet ECMC concedes that callers put on hold for less than four seconds would not have 25 heard the entire message. (Id. at 8-9.) 26 These facts posed a problem for the original representative plaintiff, who was kept 27 on hold for more than four seconds, suggesting he consented to the recording. Thus, when 28 plaintiff moved to compel all recorded calls and hold-time information, ECMC objected, 1 arguing that “the true purpose of this motion” was “to obtain evidence . . . to locate a new 2 class representative.” (ECF 93, at 4.) This Court nonetheless ordered ECMC to turn over 3 the evidence, finding that plaintiff had a legitimate interest in rebutting ECMC’s hold-time 4 defense theory. (ECF 144, at 45-47.) So ECMC turned over the requested records with a 5 “confidential” designation. Under the stipulated protective order, that designation 6 prohibited using such discovery “for any purpose other than prosecuting this litigation.” 7 (ECF 18, at 2; ECF 185-1, at 2-3.) 8 Armed with this data, plaintiff’s counsel identified and contacted someone with a 9 hold time of zero seconds: Beheshta Mahboob. (ECF 185-1, at 3.) This was the first time 10 Mahboob learned of this litigation or that she had been recorded. (ECF 98-4, at 2; 11 ECF 185-3, at 5-7.) Four months later, plaintiff’s counsel moved to amend the complaint 12 to add Mahboob as a “putative class representative.” (ECF 125-1, at 2.) The Court denied 13 that motion and stayed the case while ECMC appealed class certification. (ECF 143, at 3.) 14 Three days later, plaintiff’s counsel brought an identical class action in the Central District 15 of California, with Mahboob as lead plaintiff. See generally Mahboob v. Educ. Credit 16 Mgmt. Corp., No. 18cv2221-JAK-GJS (C.D. Cal. 2018) (hereinafter “Mahboob 2”), 17 ECF 1. After ECMC’s successful class-certification appeal, the Court dismissed the 18 original representative plaintiff in this case and allowed Mahboob to become lead plaintiff. 19 (See ECF 152, at 1; ECF 158, at 1.) Thereafter, in the Central District, the parties stipulated 20 to dismiss Mahboob 2. (ECF 185-1, at 4.) 22 ECMC contends that plaintiff’s counsel’s contact with Mahboob violated the 23 stipulated protective order and the California Rules of Professional Conduct. (ECF 185, 24 at 12-18.) Plaintiff, in turn, demands sanctions against the defense for raising frivolous 25 allegations. 26 A. California Rules of Professional Conduct 27 As the professional-conduct issue is more straightforward, the Court addresses it 28 first. “A lawyer shall not by in-person, live telephone or real-time electronic contact solicit 1 professional employment when a significant motive for doing so is the lawyer’s pecuniary 2 gain.” Cal. R. Prof. Conduct 7.3(a). Solicitation refers to “an oral or written targeted 3 communication . . . that offers to provide, or can reasonably be understood as offering to 4 provide, legal services.” Cal. R. Prof. Conduct 7.3(e). But “[a]n attorney who directly 5 contacts individuals for legitimate investigative reasons is not barred from representing 6 those individuals if requested to do so.” Hernandez v. Best Buy Stores, 7 No. 13CV2587-JM-KSC, 2015 WL 7176352, at *7 (S.D. Cal. Nov. 13, 2015). A court may 8 take “remedial or corrective action based on a clear record and specific findings.” Id. at *15 9 (citing Gulf Oil Co. v. Bernard, 452 U.S. 89, 101 (1981)) (internal quotes omitted). “The 10 ‘mere possibility’ of abusive tactics is simply not enough.” Id. 11 ECMC has offered no proof of solicitation. In her deposition, Mahboob 12 acknowledges that plaintiff’s counsel contacted her by phone and informed her of this 13 lawsuit. (ECF 185-3, at 5-9.) Plaintiff’s counsel maintains that this contact was purely for 14 investigative purposes, to test ECMC’s hold-time theory. (ECF 189, at 16.) And there is 15 no evidence about who first broached the subject of representation. (See generally 16 ECF 185-3.) Even when “two opposing inferences can be drawn” about the propriety of 17 counsel’s conduct, “the Court will not leap to the conclusion that plaintiff’s counsel 18 engaged in abusive or unethical practices.” Hernandez, 2015 WL 7176352, at *15. Thus, 19 on this record, the Court cannot find solicitation. 20 B. Stipulated Protective Order 21 At the outset of discovery, the Court granted a joint motion for a stipulated protective 22 order. (ECF 18.) Under that order, material designated as “confidential” may only be 23 disclosed to certain people, including people “to whom disclosure is reasonably necessary” 24 and who agree not to disclose the information. (ECF 18, at 8-9, 14.) The protective order 25 also states that confidential material “disclosed or produced by another Party . . . [may be 26 used] in connection with this case only for prosecuting, defending, or attempting to settle 27 this litigation.” (Id. at 8 (emphasis added).) 28 1 ECMC labeled as “confidential” the discovery with Mahboob’s contact information 2 and hold time, and no one disputes that designation. (ECF 185-1, at 3.) ECMC claims that 3 plaintiff’s counsel violated the protective order by (1) contacting and recruiting plaintiff 4 Mahboob and (2) filing the second lawsuit in the Central District of California. (ECF 185, 5 at 14-15.) 6 1. Contacting Mahboob 7 “[A]s a general rule, before class certification has taken place, all parties are entitled 8 to equal access to persons who potentially have an interest in or relevant knowledge of the 9 subject of the action, but who are not yet parties.” Amaraut v. Sprint/United Mgmt. Co., 10 No. 3:19-CV-411-WQH-AHG, 2020 WL 8024170, at *5 (S.D. Cal. Jan. 14, 2020) (citation 11 omitted). Because “plaintiffs have a right to contact members of the putative class, the 12 propriety of a protective order—or enforcing an already entered protective order—must 13 involve a careful balancing of the potential for abuse created by the class action and the 14 right of the plaintiffs to contact potential class members.” Balschmiter v. TD Auto Fin. 15 LLC, No. 13-CV-1186-JPS, 2015 WL 2451853, at *4 (E.D. Wis. May 21, 2015) (citation 16 and quotation marks omitted). 17 ECMC argues that plaintiff’s counsel violated the protective order by contacting 18 Mahboob, who was not within any of the categories of persons to whom confidential 19 information could be disclosed. (ECF 185, at 14; ECF 197, at 7-8.) Indeed, Mahboob 20 “never signed an ‘Acknowledgment and Agreement to be Bound’” by the protective order. 21 (ECF 185, at 10.) Yet the protective order did not prohibit contacting potential class 22 members; it barred disclosing confidential discovery to them.

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