Thursday, May 14, 2020

Sosa v. CashCall, Inc. (Cal. Ct. App. - May 13, 2020)

This is why the are so few opinions about discovery in the Court of Appeal.

It's not that discovery is unimportant; it is.  It's also not that discovery disputes are rare; indeed, they are ubiquitous.

It's simply that most discovery disputes are relatively moot once the case gets to trial.  And, even if they're not moot, the Court of Appeal typically just doesn't care.  It doesn't feel like getting down and dirty into the pedantic details of who produced what and when and why.  Which means, in turn, that most parties don't raise routine discovery disputes on appeal, and when they do, they lose.

This case involves a lender (CashCall) who accesses credit reports about consumers.  Typically, in California, you're not allowed to do that without the consumer's consent.  Invasion of privacy and the like.  But there's an exception.  If you're making a "firm offer of credit" to the consumer, it's okay to pull their credit report in advance.  Otherwise, nope, can't do it, and you get spanked for statutory penalties of up to $2500.

It's undisputed that CashCall pulls credit reports of consumers without their consent.  For example, in April 2015 alone, it pulled nearly 370,000 credit reports.  In October 2015, it pulled another 250,000 reports; in March 2016, it pulled over half a million reports; and in March 2017, it pulled another half a million reports.

That's a lot of credit reports.

But CashCall said it was doing to to make a "firm offer of credit" to those consumers.  CashCall says that it selected a credit score range, and then got a million-plus names of consumers who were in that range (e.g., tolerable but not great credit), and sent all those consumers a "firm offer of credit" that said that CashCall was willing to make them a loan of "up $10,600" or so.  Hence, it says, what it did was legal.

There's some evidence that CashCall is telling the truth.  It almost certainly was willing to make loans to at least some of these people it contacted -- otherwise, why contact them?  But was it a "firm offer of credit" to everyone?  That's much less clear.  The letters it sent expressly said that the loan that was being offered was "not guaranteed" and depended on "certain criteria" in their credit reports, and that if those (unstated) "criteria" were no longer met, no loan would be offered.

So plaintiff sues.  She says that CashCall was just fishing, which isn't allowed.  Yes, you can access credit reports if you're making a "firm" offer of credit.  But, she alleges, that's not what CashCall was doing.  It was sending out letters to lots of people, she says, to whom it wouldn't actually make a loan of any type or amount, and that doesn't satisfy the statute.

Defendant eventually moves for summary judgment.  Its motion encloses examples of some of the letters it sent out (with the "no guarantee" and other language).  And it also includes a conclusory declaration of one of its employees that said that CashCall intended by its letters to make a "firm offer of credit" to each recipient.  A nice little declaration that simply mimics the language of the statute.

Here's where the discovery dispute comes in.

Plaintiff previously sent out interrogatory that said, essentially, "Of the million-plus people whose credit reports you accessed and to whom you sent these allegedly 'firm offers of credit,' how many of them actually took out a loan from you?"  Defendant refused to respond, plaintiff filed a motion to compel, and the trial court denied the motion, finding the information "irrelevant" to the case at hand.

Which it's obviously not.  Let's say they sent out a million letters and, in response, made a million loans.  That's strong evidence that they were making "firm offers of credit," no?  Similarly, let's say they sent out a million letters but only actually made a single loan.  That would in turn provide some evidence that they didn't really intend to make loans to everyone they contacted.  It wouldn't be conclusive, evidence, of course.  But it'd definitely be a disparity that required explaining.  It'd be some evidence that these allegedly "firm" offers of credit weren't so firm after all.

And, presumably, you'd follow up on whatever discovery response you received.  Let's say CashCall said in response "We sent 1.2 million 'firm offers of credit' and made 26,345 actual loans."  Now that you know how many loans they got, you'd then ask "Okay, so you made 26,345 loans.  How many 'Yes' answers did you get to your letters applying for those loans?"  If CashCall responded:  "We got 26,392 'Yes' answers," and we know they made 26,345 loans, well, shucks, then it looks like this case is a loser, and their alleged "firm offers of credit" really were firm offers, with just a small minority of loan applicants (47 of 26,392) falling out, presumably because some material change had transpired (a bankruptcy filing, a credit card default, a foreclosure, etc.) between the mailing of the letter and the "Yes" received in response thereto.  By contrast, if we know they made 26,345 loans, and then they tell us "We got 97,358 loan applications in response to our letters," well, now, the lawsuit is looking very good.  Because defendant's going to have a really hard time explaining why it made purportedly "firm" offers of credit and yet only actually funded a fairly small fraction of those loans.  That'd be an awesome set of facts for plaintiff.

Which is precisely what the majority opinion here holds (albeit in less excruciating detail than I've just articulated above).  Justice Moore says that you can't deny the plaintiff an opportunity to obtain relevant evidence in discovery and yet then, on summary judgment, dismiss the case because plaintiff doesn't have the type of evidence that you prevented them from obtaining in discovery.  Not fair, not equitable, doesn't work.

Which seems exactly right to me.  Totally correct adjudication.

Yet Justice Aronson dissents.  And his dissent proves precisely the point that I made at the outset of this post.

Because Justice Aronson's dissent is far from frivolous.  He says, basically:  "Wait a minute.  We review discovery rulings for abuse of discretion.  At worst, this one was close.  There were lots of reasons the request might not be all that relevant.  So it wasn't necessarily an abuse of discretion, so we should affirm.  Plus, even if it was, for discovery disputes, a plaintiff can only obtain a reversal if she establishes that the absent discovery more likely than not would have changed the result.  Which she can't do here, because there's no evidence that the discovery answer would have actually proved her case for her."  (Justice Aronson makes some other points as well, but I want to focus on the most doctrinally significant ones.)

Here's the thing:  Justice Aronson is right.  (At least in part.)  We do review these things for abuse of discretion.  Which is an awfully high standard.  Particularly when you're reading an expansive record on appeal and aren't all that interested in doing associate-level discovery work.  More critically, here, even if you're certain that the trial court has erred -- as I am -- how exactly are you supposed to prove that the error isn't harmless.  The whole point is that we don't know what the answer is.  If we don't know what their answer would have been, and some conceivable answers would have helped us but some possible answers would have hurt us, how the heck are we supposed to establish prejudice?  the fact that they didn't answer stops us from establishing the very thing that we're supposed to show?

Could plaintiff have propounded a narrower interrogatory?  Sure.  It could (and perhaps should) have simply asked (in essence) "What percentage of the positive responses to your alleged 'firm offers of credit' actually resulted in a loan?"  That's clearly relevant information.  It instead elected to obtain this information in two parts; first, by asking for the numerator (the number of people who got loans), and then (presumably) asking for the more discrete denominator (the number of people who applied for them -- as opposed to the number of people who got letters, which we already know) later.  Once the trial court refused to give you the numerator, however, there's no point in asking for the other figure (the denominator), since you can't construct the relevant figures at that point anyway.

So, yes, in the end, the majority actually reverses the decision below, in a rare victory based upon the denial of relevant discovery.  But that there's a dissent, that the dissent makes decent arguments, and that it takes a case like this one to actually get a reversal proves the point.  It's extraordinarily difficult to get relief on appeal for even the most egregious discovery error below.  Total longshot.

Now, between you and me, while I'm extremely happy that the opinion comes out the way it does, which I believe to be the right result, I suspect that CashCall will in fact prevail on remand.  (Which, in my mind, only makes it even sillier not to grant the discovery that plaintiff requested below.)  The rates that CashCall offered in their letters were both (1) in a range, and (2) shockingly confiscatory.  CashCall was offering to make loans at an APR that, the letters said, "range[] from 99.75% to 184.36%."  I think that CashCall is probably telling the truth when it says that it was indeed willing to make a loan at such an absurd rate to virtually anyone stupid (or desperate) enough to request it.  And in those rare occasions when it wasn't willing to act as a legally-permitted loan shark, I suspect that there were, indeed, likely good reasons for this unwillingness.  So, yeah, in the end, I think CashCall did probably make "firm" (though abusive) offers of credit.

But the point of discovery is to allow the other side to test the veracity of your self-interested factual assertions.  And that didn't happen here.  Hence the reversal to give the plaintiff another shot.

Even if one internally suspects (as I do) that the result will probably end up the same.