Nei Contracting & Engineering v. Hanson Aggregates Pacific Sw, 926 F.3d 528

Background

NEI, a Hanson customer, placed orders via a phone directory that routed calls to Ready Mix Dispatch or Aggregate Dispatch; Hanson recorded calls to those lines.
From July 15, 2009, Hanson’s phone system played a warning that calls “may be monitored for quality assurance,” but did not explicitly say calls were recorded; the message was amended on December 23, 2013 to say “may be monitored or recorded.”
NEI sued Hanson under California’s Invasion of Privacy Act (CIPA), ultimately alleging violations of Penal Code § 632.7 for recording cellular calls without consent and seeking statutory damages and class certification.
The district court initially denied class certification for lack of predominance, later certified after reconsideration, then decertified the class after Hanson identified nine customers who knew of the recording practice.
After decertification, the court ruled NEI lacked Article III standing to pursue its individual CIPA claim; NEI appealed only the decertification order (not the standing ruling or final judgment on the merits).
The Ninth Circuit affirmed decertification, holding that a class must be decertified when the named representative lacks standing and NEI waived any challenge to the standing determination on appeal.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether class decertification was an abuse of discretion under Rule 23(b)(3) predominance	NEI argued decertification was erroneous because class-wide issues predominated and the district court erred in assessing individualized consent	Hanson argued individualized consent inquiries and named plaintiffs’ lack of standing defeated predominance and certification	Affirmed decertification; district court did not abuse discretion because named plaintiff lacked standing
Whether named plaintiff has Article III standing to represent the class	NEI contended it had a concrete injury from unlawful recordings and thus could represent the class on appeal	Hanson argued NEI lacked a concrete, particularized injury as required by Spokeo and Lujan	Court held NEI lacked standing; NEI waived challenge by not appealing the standing ruling
Whether mootness exceptions (personal stake; capable of repetition yet evading review) allow appeal of decertification absent standing	NEI invoked exceptions to preserve class-certification appeal despite adverse individual judgment	Hanson argued mootness exceptions do not cure lack of Article III standing	Court held mootness exceptions do not excuse absence of standing; standing admits no similar exception
Whether the case should proceed with substitute class representatives after named plaintiff lacks standing	NEI suggested class interests justify continuation	Hanson argued certification must be vacated where representative never had standing	Court cited precedent requiring decertification and vacatur when representative lacks standing; affirmed decertification

Key Cases Cited

Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (standing requires concrete and particularized injury)
Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (elements of Article III standing)
O’Shea v. Littleton, 414 U.S. 488 (1974) (if named plaintiffs lack case-or-controversy, they cannot represent a class)
Sierra Club v. Morton, 405 U.S. 727 (1972) (standing prerequisites in environmental and public-interest contexts)
Lierboe v. State Farm Mut. Auto. Ins. Co., 350 F.3d 1018 (9th Cir. 2003) (class must be vacated when named plaintiff never had the underlying claim)
Williams v. Boeing Co., 517 F.3d 1120 (9th Cir. 2008) (decertification appropriate where named plaintiffs concede lack of standing for subclass)
Deposit Guaranty Nat’l Bank v. Roper, 445 U.S. 326 (1980) (named plaintiff with continuing personal stake may appeal certification decisions)
U.S. Parole Comm’n v. Geraghty, 445 U.S. 388 (1980) (class certification litigation despite loss of personal stake in certain circumstances)
Friends of the Earth, Inc. v. Laidlaw Environmental Servs., 528 U.S. 167 (2000) (mootness and standing are distinct; capable-of-repetition mootness does not create standing)