Lewis v. Verizon Communications, Inc., No. CV 10-2337 PSG (MANX), 2010 WL 2650363 (C.D. Cal. June 30, 2010).

A District Court in California remanded the action to state court holding that CAFA jurisdiction is not dependent on all premium content charges billed to telephone customers but only on proof of what portion of the charges were unauthorized.

The plaintiff filed this class action in state court against the defendants, Verizon Communications Inc. (“VCI”), Verizon California Inc. (“Verizon”) and Enhanced Services Billing Inc. (“ESBI”), asserting claims for 1) violation of California Public Utilities Code § 2890, 2) violations of California’s unfair competition law, 3) unjust enrichment, 4) breach of contract, and 5) tortious interference with contract.

ESBI is a billing processor, or “aggregator,” for a variety of telephone-related services offered by third-party vendors.  These services, known as “premium content,” include such services as weather and traffic reports, sports scores, and stock tips.  ESBI allegedly bills customers for this premium content through local landline telephone providers like Verizon.  The plaintiff claimed that Verizon and ESBI had a practice of billing landline telephone service subscribers for premium content without the subscribers’ authorization.

The plaintiff sought to represent two classes: first, “all telephone subscribers in the state of California who suffered losses or damages as a result of ESBI billing for premium content products and services not authorized by the subscriber, and second, “all Verizon landline telephone subscribers in the state of California who suffered losses or damages as a result of ESBI billing for premium content products and services not authorized by the subscriber.”

The defendants removed the action to the federal court under CAFA’s federal diversity jurisdiction. The plaintiff sought to remand on the grounds that the defendants failed to demonstrate that CAFA’s amount-in-controversy requirement was met. The District Court agreed. 

The only evidence offered in support of the defendants’ contention that the case met CAFA’s $5 million amount-in controversy requirement was the declaration of Paul E. Glover. The declaration indicated only that the amount of all premium content charges passed along from ESBI to Verizon landline telephone subscribers for the relevant period exceeded $5 million.

The plaintiff and proposed class members did not seek recovery of all ESBI premium content charges billed to subscribers, but only those amounts that were billed without the subscribers’ authorization. Because there was no evidence before the Court concerning the amount of premium content charges billed to subscribers’ without their authorization, the Court remarked that the amount in controversy in this case was still a matter of pure speculation.  

Verizon, however, argued that it is not required to prove what portion of its charges for premium content was unauthorized in order to meet CAFA’s amount-in-controversy requirement. According to Verizon, the plaintiff’s claims put ‘in controversy’ the propriety of all premium content charges billed by the defendants because they were based on the defendants’ alleged billing practices common to all class members. Verizon also relied on Spivey v. Vertrue, Inc., 528 F.3d 982, 986 (7th Cir. 2008), and Strawn v. AT&T Mobility LLC, 530 F.3d 293, 298-99 (4th Cir. 2008) to support this proposition. In these circumstances, Verizon contended, “CAFA jurisdiction did not depend on proof of what portion of the charges were unauthorized.”  (Editors’ Note:  See the CAFA Law Blog analysis of Spivey posted on September 4, 2008). 

In Spivey the district court apparently viewed the amount in controversy as limited to the unauthorized charges; whereas, the Seventh Circuit explained that “a removing defendant need not confess liability in order to show that the controversy exceeds the threshold.”

The Court observed that unlike here, the Strawn court had before it undisputed evidence of the class size and the amount claimed per class member; thus, the amount in controversy in Strawn was not a matter of speculation.

The Court remarked that neither Spivey nor Strawn was binding authority on it, and that neither case had been relied upon by a district court in Ninth Circuit.  No district court in the Ninth Circuit has cited to Strawn, and the three district courts, which considered Spivey declined to follow it–Amezcua, 2009 WL 1190553; Coren, 2009 WL 764883; Bates v. Sendme, Inc., 2009 WL 942342 (N.D. Cal. April 6, 2009).  (Editors" Note:  See the CAFA Law Blog anaylsis of Amezcua posted on July 10, 2009 and the analysis of Sendme posted on August 21, 2009).   Accordingly, the Court found the reasoning of its sister courts to be persuasive—the plaintiff’s claims have put in controversy an amount that was still a matter of pure speculation, which would not support jurisdiction.