Filed 3/14/14 Ammari Electronics v. Pacific Bell Directory CA1/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION ONE
AMMARI ELECTRONICS et al.,
Plaintiffs and Respondents,
A136801
v.
PACIFIC BELL DIRECTORY, (Alameda County
Super. Ct. No. RG05198014)
Defendant and Appellant.
Pacific Bell Directory (Pacific Bell) appeals from a class action judgment
awarding over $17 million in breach of contract damages to tens of thousands of
advertisers in its Yellow Pages directories (directories). The judgment is premised on
Pacific Bell’s asserted failure to exert its best efforts in distributing the directories to its
business and residential customers in all parts of the state. Pacific Bell challenges (1) the
trial court’s rulings certifying this case as a class action, (2) the sufficiency of the breach
of contract evidence, and (3) the amount of damages awarded. We affirm the judgment.
I. FACTUAL AND PROCEDURAL BACKGROUND1
Named plaintiffs2 and the approximately 380,000 class members they represent
(collectively plaintiffs) entered into standardized contracts with defendant Pacific Bell to
1
This section is adapted in part from the nonpublished decision by a different
panel of this court in Ammari Electronics v. Pacific Bell Directory (Nov. 15, 2011,
A126326) (Ammari I).
2
Named plaintiffs are Ammari Electronics; Mehdi Ammari; Framer’s Workshop;
Koszdin, Fields, Sherry & Katz, a Law Partnership; and Law Offices of William J.
Kropach.
have their advertisements put into its directories, and to have the directories distributed
free of charge to potential customers in each plaintiff’s geographic distribution area.
Plaintiffs contracted with Pacific Bell to advertise in at least one of the geographically
distinct directory districts throughout California.3 Some of the plaintiffs advertised in
more than one directory. Plaintiffs alleged that between February 2002 and May 2004,
Pacific Bell breached those contracts by failing to deliver a substantial quantity of the
directories containing plaintiffs’ advertisements to potential customers as agreed.
Over Pacific Bell’s objection, this lawsuit was certified as a class action on behalf
of “[a]ll individuals and businesses who had written contracts with Pacific Bell Directory
to purchase advertisements in the SBC yellow pages directories that were published and
were supposed to be distributed in California . . . at any time between February 1, 2002
and May 30, 2004.” It was alleged that during the 29-month class period, plaintiffs and
over 350,000 other California businesses purchased more than $2 billion dollars worth of
advertising from Pacific Bell. The trial commenced on May 12, 2009, and was
conducted in two phases. The court first held a bench trial before a jury was empanelled
to interpret the contract, and to determine the contractual standard by which Pacific Bell’s
delivery performance should be measured. In a written decision, the court held “the rules
of contract interpretation and the extrinsic evidence support the ‘best efforts/good
faith/due diligence’ obligation and do not support an obligation to achieve a quantitative
result . . . .”
The case then proceeded to a five-week jury trial. Every facet of Pacific Bell’s
complex system for delivering directories was described for the jury. Briefly
summarized, in order to deliver approximately 30 million directories every year to a vast
variety of locations in California, Pacific Bell uses third party distribution vendors.
During the class period, Pacific Bell contracted with two such vendors—Product
Development Corporation (PDC) and ClientLogic. ClientLogic, in turn, subcontracted
3
We use the term “directory district” to refer to a telephone directory identified by
geographic area and issue date, e.g., the 2002 Sacramento directory.
2
with Turtle Ridge Media Group to perform the hand distribution of California directories.
Pacific Bell stipulated that it was legally responsible for the delivery performance of its
third party distribution vendors.
Each time Pacific Bell published a new edition of a directory in a particular area,
which was usually every 12 months, it contractually required its third party distribution
vendor to hand-deliver a copy of the new directory to all business and residential
telephone customers in the directory district. This is known as the “primary delivery” or
“initial distribution,” and usually takes from 7 to 30 days to complete. After the initial
distribution, there is a “secondary distribution,” which is used to distribute directories to
“new connects” (telephone customers who move to the directory area after initial
distribution), telephone booths, access stands (locations where directories are made
available to the public for pickup), and to people or businesses who call to request
directories during the year. It was estimated that approximately 20 percent of the
directories are delivered during secondary distribution.
Throughout the relevant time period, Pacific Bell paid Certified Audit of
Circulations (CAC), a third party nonprofit auditor, to conduct delivery verification
surveys to gauge the success of the distribution for each directory published and
distributed in California. CAC performed surveys not only for Pacific Bell, but also for
other phone book companies, newspapers, and advertisers. CAC performed each survey
after notification that the initial delivery had been completed. The same audit
methodology was used throughout California. After the third party distribution vendor
completed the initial delivery, CAC telephoned a random sample of residences and
businesses within the directory area. Among other things, the survey respondents were
asked whether or not they received a directory. CAC expressed the survey results as a
percentage of businesses and residences who received directories in each directory
district. CAC ensured that the number of calls provided statistically significant audit
results with a 2 to 3 percent margin of error. Plaintiffs’ statistical and survey expert,
Michael Sullivan, Ph.D., confirmed that CAC’s methodology conformed to generally
3
accepted survey practice, and that the CAC scores were valid and reliable measures of the
percentage of directories that were actually delivered in each directory district.
There was overwhelming evidence that Pacific Bell relied on these CAC delivery
verification surveys for various purposes, including to measure the effectiveness of its
third party distribution vendor’s performance. Many documents showed that Pacific Bell
required its distribution vendor to ensure that at least 96 percent of the telephone
customers in each directory district receive a directory as measured by the CAC scores.
There was evidence of ongoing, severe problems in delivering directories,
including many documented, out-of-court admissions by Pacific Bell’s own distribution
managers acknowledging delivery failures. Illustrative examples include written
acknowledgement that Pacific Bell’s third party distribution vendor “fail[ed] to perform
at the basic competency level” and that emergency procedures needed to be implemented.
There was evidence Pacific Bell terminated PDC after criticizing its delivery effort
during the first half of the class period. Likewise, Pacific Bell terminated the
replacement distributor, ClientLogic, for “failure to perform” one year into a three-year
distribution contract, after repeated criticism of its delivery performance. Plaintiffs
argued that despite knowledge of delivery failures, Pacific Bell continued to bill plaintiffs
in full for advertising charges, with the exception that the few advertisers who became
aware of delivery failures and complained about them were given a partial refund of their
advertising charges.
To obtain class certification, plaintiffs agreed to forego damages based on the
specific impact on particular plaintiffs—such as lost profits—acknowledging that this
measure of damages would be difficult to prove or measure on a classwide basis. Instead,
the class sought damages in the form of a refund for a portion of their advertising
charges. The refund amount was calculated based on the difference between the
percentage of residences and businesses that should have received timely delivery of
directories but did not, and the percentage of residences and businesses that actually
received timely delivery of directories. Under plaintiffs’ damages model, all class
members advertising in a specific directory would receive a fixed refund of a percentage
4
of the total advertising charges paid to Pacific Bell for that directory in proportion to the
delivery shortfall. The net amounts plaintiffs paid to Pacific Bell in advertising fees for
each directory district was established by stipulation of the parties. The trial court
articulated the damage formula as follows: “[A]ssuming liability, the jury will determine
what level of distribution [Pacific Bell] would have achieved if it had used its ‘best
efforts and due diligence’ and then determine the pro rata rebate [of net advertising fees
paid], if any, based on that figure.”
During the relevant timeframe, Pacific Bell distributed 163 different directories,
specific to each year and in each directory area. This required the jury to separately
evaluate Pacific Bell’s delivery performance for each of the 163 directories at issue.
Consequently, the verdict form was structured so that the jury had to determine with
respect to each of the 163 directories whether Pacific Bell breached its contractual
obligation to the plaintiffs and caused injury to them, and if so, in what amount.
The jury returned a verdict in plaintiffs’ favor as to 66 of the 163 directory
districts for which plaintiffs had claimed a breach of contract, and specified separate
damage amounts for each of the 66 different districts, totaling approximately
$17.35 million in damages. In rendering its verdict, it appears that for all but two
directory districts the jury used a 94.5 percent composite CAC score as its baseline for
determining whether and to what extent Pacific Bell had breached the contract. For the
2002 Los Angeles directory, the jury used an 89.5 percent score, and for the 2003 San
Francisco directory, it used an 89.6 percent baseline score.
However, after the jury returned its verdict, the trial court directed the clerk not to
enter judgment on the verdict, and granted Pacific Bell’s motion for a judgment
notwithstanding the verdict (JNOV).4 The court acknowledged the record contained
4
The motion ultimately granted by the trial court was made originally as a motion
for directed verdict at the close of the evidence, but the trial court deferred ruling on it
until after the jury rendered its verdict. While the parties and the trial court continued to
refer to the motion ultimately granted as one for a “directed verdict,” it became a motion
for JNOV by the time it was considered by the court, as explained in Ammari I, supra,
A126326.
5
evidence supporting the jury’s verdict that Pacific Bell had breached the contract by
failing to deliver directories in good faith using best efforts and due diligence, although a
contrary finding would also have been supported. Nevertheless, the court found “there is
no substantial evidence from which the jury could determine whether harm was caused
either as to the class as a whole or on a book-by-book basis.” In particular, it found no
basis in the evidence that would have permitted the jury to find different CAC
percentages appropriate for different books, and it believed the CAC scores inherently
understated the number of books actually delivered. Judgment was entered for Pacific
Bell on June 30, 2009.
In Ammari I, plaintiffs appealed from the order granting judgment for Pacific Bell
notwithstanding the verdict, and sought a new trial on the grounds the trial court should
have construed the contract to include an implied obligation for Pacific Bell to deliver the
directories in accordance with the industry standard, under which the damages would
likely have been twice the amount of the jury’s verdict. Ammari I denied plaintiffs a new
trial, but reversed the JNOV in favor of Pacific Bell. The panel found the trial court had
correctly instructed the jury that the contract required Pacific Bell to “deliver directories
in [each] directory area . . . using best efforts and due diligence,” but did not specify
“ ‘any particular result in terms of number or percentage of directories delivered.’ ”
(Ammari I, supra, A126326.) With regard to the JNOV, the panel found that as long as
the fact of damages was established—that plaintiffs paid for advertising distribution
services they did not receive—the law only required that the best evidence be adduced of
their amount as the nature of the case permitted. The appellate court found the plaintiffs’
evidence, viewed in the most favorable light under the applicable standard of review of
an order granting a JNOV, was sufficient to support the jury’s baseline determinations
and not so speculative as to render it invalid.5 Ammari I reinstated the jury’s verdict and
directed the trial court to enter judgment accordingly.
5
The Court of Appeal rejected arguments the verdict was fatally undermined by
the failure of plaintiffs’ damages expert to pinpoint an exact percentage of deliveries that
6
On remand, the trial court entered judgment in the principal amount of
$17,350,217, with prejudgment interest of $5,333,628.96. Pacific Bell timely appealed
from the judgment.
II. DISCUSSION
Pacific Bell contends the judgment must be reversed because (1) the trial court
should not have certified the case as a class action, (2) the named plaintiffs’ claims were
not typical of the claims of advertisers in other directories, (3) there was no substantial
evidence Pacific Bell breached its contracts with plaintiffs, and (4) the damages awarded
are excessive. Before reaching the merits of these arguments, we address plaintiffs’
position that some or all of them are barred by the law-of-the-case doctrine or by
principles of waiver and judicial estoppel.
A. Law-of-the-case Doctrine
Plaintiffs maintain the law-of-the-case doctrine is fatal to Pacific Bell’s appeal to
the extent it relies on “the same sufficiency-of-the-evidence challenges that [Pacific Bell]
previously raised in unsuccessfully defending the trial court’s JNOV” in Ammari I. We
find the law-of-the-case doctrine has only a tangential application to the issues presented
in this case. It is not dispositive of any of Pacific Bell’s main contentions.
As an initial matter, we disagree that Pacific Bell conceded in litigating Ammari I
there was a sufficient factual basis to support the jury’s findings of breach of contract.
The purported concession apparently derives from the following language in a footnote in
Pacific Bell’s respondent’s brief in Ammari I: “Given the trial court was correct that the
Advertisers failed to present substantial evidence from which a jury could find harm,
[Pacific Bell] is not challenging the trial court’s view that the jury could have properly
found either way on whether [Pacific Bell] used good faith and best efforts in delivering
its directories.” (Italics added.) This comment must be viewed in context. In
announcing its JNOV ruling, the trial court had observed in passing that the record
would constitute a best efforts delivery performance, or by flaws in the way the CAC
surveys were conducted.
7
contained evidence from which the jury could properly find, as it did, that Pacific Bell
breached the contracts, but that a contrary finding on that element would also have been
supported. Since that view of the breach evidence was not logically irreconcilable with
the trial court’s favorable JNOV ruling, Pacific Bell simply chose not to challenge it in
Ammari I. That is not a concession of the issue for purposes of this appeal. Furthermore,
no legal rule required Pacific Bell to make every argument it could have made for
upholding the JNOV in the prior appeal, or be foreclosed from making it in a future
appeal from the judgment, as plaintiffs suggest.
Out of an abundance of caution, Pacific Bell did file a protective cross-appeal in
Ammari I to preserve “a full opportunity to challenge in the trial court by post trial
motions and thereafter in the Court of Appeal by way of appeal any judgment entered in
Plaintiffs[’] favor as a result of this appeal.” Plaintiffs moved to dismiss the cross-appeal,
arguing it was unnecessary to preserve Pacific Bell’s appellate rights: “If the defense
judgment . . . is reversed and remanded to the Superior Court, that court should follow the
usual procedure of entering a judgment on the jury verdict. [Citation.] [Pacific Bell]
may then seek whatever relief it is entitled to at that time and, if such relief is denied,
appeal as permitted by the Code of Civil Procedure.” Plaintiffs also argued the protective
cross-appeal was unnecessary to preserve Pacific Bell’s right to appeal the trial court’s
class certification rulings. The Court of Appeal agreed with plaintiffs, and dismissed the
cross-appeal. At Pacific Bell’s request, the court modified the dispositional paragraph in
Ammari I after the opinion was filed to specify that its affirmance of the judgment in
plaintiffs’ favor to be entered on remand was “without prejudice to any postjudgment and
appellate rights possessed by Pacific Bell.” In our view, to now hold Ammari I precludes
Pacific Bell from raising any sufficiency-of-the evidence challenge to the judgment
would directly conflict with the premise upon which Pacific Bell’s protective cross-
appeal was dismissed and with the dispositional language chosen by the Court of Appeal
in its Ammari I opinion.
The law-of-the-case doctrine has been stated as follows: “ ‘The decision of an
appellate court, stating a rule of law necessary to the decision of the case, conclusively
8
establishes that rule and makes it determinative of the rights of the same parties in any
subsequent retrial or appeal in the same case.’ ” (Morohoshi v. Pacific Home (2004)
34 Cal.4th 482, 491, quoting 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 895,
p. 928.) The law-of-the-case doctrine is thus binding on a party to the prior appeal
although the party did not take the appeal. (See Penziner v. West American Finance Co.
(1937) 10 Cal.2d 160, 167–170; Clark v. Deschamps (1952) 109 Cal.App.2d 765, 768.)
An appellate court’s decision on the sufficiency of the evidence comes within the
doctrine. (Wells v. Lloyd (1942) 21 Cal.2d 452, 455; 9 Witkin, Cal. Procedure (5th ed.
2008) § 470, p. 528, citing cases.)
Plaintiffs contend Ammari I decided rather than assumed there was substantial
evidence Pacific Bell breached its contract with plaintiffs. We do not read the decision
that way. Plaintiffs pick out the following isolated sentences from Ammari I, which they
maintain bar the present appeal: (1) “Notwithstanding evidence supporting the jury’s
finding that the contract had been breached, the court found that judgment should be
entered for Pacific Bell because plaintiffs had failed to prove they had been harmed by
any actions on Pacific Bell’s part”; (2) “Where, as here, plaintiffs are clearly damaged by
a breach of contract—they paid for advertising distribution services that they did not
receive—they will not be denied recovery simply because precise proof of the amount of
damage is not available”; and (3) “Tested by the standards set out in these cases, and
viewing plaintiffs’ evidence in the most favorable light as we are required to do under our
standard of review, we conclude plaintiffs’ evidence was sufficient to support the jury’s
baseline determination.” (Ammari I, supra, A126326; hereafter referred to as sentences
(1), (2) and (3).)
In our view, sentence (1) simply refers back to the trial court’s determination there
was evidence to support the jury’s finding of breach, which Pacific Bell did not challenge
on appeal. The Court of Appeal in Ammari I simply assumed that analysis of the breach
of contract evidence was correct for purposes of the first appeal since no party contested
it, and it involved a different element of the contract cause of action than the proof of
harm element on which the trial court’s JNOV ruling rested.
9
The focus of sentence (2), as shown by the context in which it appeared and the
case citation immediately following it,6 was on the distinction between proof of the fact a
party was damaged by a breach of contract, without which there is no cause of action, and
proof of the amount of damages caused by such breach, which need not be very strong in
order to support an award. The Court of Appeal found there was clear evidence of
damage. It was not concerned with the evidence of breach because that issue was not in
dispute for purposes of the appeal, nor was there any dispute that Pacific Bell billed all
but a few advertisers in full for advertising charges, notwithstanding assumed breaches.
As the Court of Appeal noted, Pacific Bell did not challenge restitution of advertising
charges as an appropriate remedy if the contract was in fact breached. Thus sentence (2)
is based on an implicit assumption about the sufficiency of the breach evidence, and the
absence of any dispute over Pacific Bell’s advertising charges, but it states no rule of law
that the evidence of either was sufficient.
Sentence (3) does reflect an actual decision by the Court of Appeal about a
sufficiency-of-the-evidence issue, namely, whether plaintiffs’ evidence concerning the
CAC surveys was sufficient to support the baseline CAC levels the jury used to calculate
damages. The court decided that evidence did provide a “reasonable basis of
computation” of the different baseline amounts the jury used for those calculations.
(Ammari I, supra, A126326.) The evidence in question was not the CAC data itself, but
the testimony of plaintiffs’ expert concerning “industry standards, Pacific Bell’s own
internal policies and standards for delivery, Pacific Bell’s promotional materials, Pacific
Bell’s standards for its third-party distribution vendors and Pacific Bell’s historic
performance.” (Ibid.) The appellate court characterized this expert testimony as
encompassing “a wide range of factors” from which the jury—consistent with the
instruction that the contracts did not require Pacific Bell to achieve any particular
6
Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 14,
footnote 3.
10
percentage delivery result—could determine the benchmark to be used to approximate
damages in each directory district. (Ibid.)
Importantly, the evidence declared sufficient by sentence (3) was not the same
evidence the court used earlier in the opinion to exemplify the breach of contract
evidence it found in the trial record. The latter consisted of (1) “evidence of ongoing,
severe problems in delivering directories, including many documented, out-of-court
admissions by Pacific Bell’s own distribution managers acknowledging delivery
failures”; (2) “written acknowledgement that Pacific Bell’s third-party distribution
vendor ‘fail[ed] to perform at the basic competency level’ and that emergency procedures
needed to be implemented”; and (3) evidence that Pacific Bell “terminated PDC after
criticizing its delivery effort during the first half of the class period,” and “terminated the
replacement distributor, ClientLogic, for ‘failure to perform’ . . . after repeated criticism
of its delivery performance.”7 (Ammari I, supra, A126326.) In other words, sentence (3)
was not intended by the Court of Appeal as a statement about the sufficiency of the
evidence it believed supported the jury’s breach of contract finding, which was not in
issue. It was a statement about the sufficiency of the specific expert testimony it believed
the jury used or could have used as a basis to quantify damages. Sentence (3) does not
express or imply a rule of law that is determinative of Pacific Bell’s breach of contract
claim in this appeal.
We also reject plaintiffs’ arguments that the law-of-the-case doctrine precludes
Pacific Bell’s claim the jury awarded excessive damages as well as its challenge to the
trial court’s class certification rulings. While plaintiffs assert Pacific Bell’s claim of
excessive damages rests on the same evidence and arguments that the appellate court
7
These were offered as examples of breach evidence, not as an exhaustive
recitation of all of the evidence on which plaintiffs may have relied. It is clear from the
trial court record plaintiffs also offered the CAC survey results to show Pacific Bell
breached its contracts by failing to deliver its telephone directories to a substantial
number of its business and residential customers throughout California. The Court of
Appeal had no occasion in Ammari I to evaluate the sufficiency of any of this evidence to
show breach of contract.
11
rejected in Ammari I, they fail to specify what rule of law necessary to the decision in that
appeal is determinative of whether the jury’s damage award was excessive. In fact, the
Court of Appeal in Ammari I did not consider or decide that issue. The court merely
decided whether there was some reasonable basis for computation of damages in the
record. While there is some overlap in Pacific Bell’s arguments on damages between the
two appeals, those arguments were offered in Ammari I to show a failure to prove harm
in that the jury’s entire damage award was grounded in nothing more than speculation
and conjecture. In this appeal Pacific Bell asserts the CAC scores failed to take account
of the full 12-month distribution effort that assertedly made up for deficiencies in the
initial hand-delivery phase. These are related, but distinct issues.
As discussed in the next section, the rule of law stated in sentence (3) of Ammari I
identified above is relevant to one of the issues Pacific Bell now raises concerning class
certification. However, that one issue is not dispositive of Pacific Bell’s position on class
certification. Ammari I itself did not address any issue of class certification that had been
raised in the trial court. In fact, as already noted, when Pacific Bell attempted to
challenge the trial court’s class certification rulings by means of its cross-appeal in
Ammari I, plaintiffs successfully moved to dismiss the cross-appeal, arguing it would be
premature to decide class certification issues in that appeal. Before that, Pacific Bell’s
petition for a writ of mandate to overturn the class certification order was summarily
denied. (Pacific Bell v. Superior Court (Dec. 5, 2007, A119392.) It would be a misuse
of the law-of-the-case doctrine to now turn the tables on Pacific Bell and hold it is not
entitled to any appellate review of the trial court’s class certification rulings on the
merits.
B. Waiver and Estoppel
Plaintiffs contend Pacific Bell’s appeal is prohibited by the doctrine of waiver
because Pacific Bell has appealed only the portion of the classwide judgment in
plaintiffs’ favor, while assertedly retaining the benefit of other portions of the judgment
that are in its favor. Plaintiffs also contend Pacific Bell is judicially estopped from
12
asserting certain positions in this appeal that are inconsistent with its prior litigation
positions. We find neither claim meritorious.
The judgment entered on remand following Ammari I separately addressed the 66
directories where plaintiffs prevailed and the remaining 122 directories where no breach
of contract was found (97 decided by the jury and 25 where plaintiffs did not present their
claims to the jury). Pacific Bell appealed only the portion of the classwide judgment
addressing the 66 directories. Plaintiffs point to the rule that a party waives its right to
appeal any portion of a nonseverable judgment if it appeals only a portion of it and
voluntarily accepts the benefits of the nonappealed portion. (See Epstein v. DeDomenico
(1990) 224 Cal.App.3d 1243, 1246 (Epstein) [accepting return of $75,000 cash security
deposit under settlement barred appeal of other settlement provisions].) The rule is based
on the principle that “ ‘the right to accept the fruits of the judgment and the right to
appeal therefrom are wholly inconsistent, and an election to take one is a renunciation of
the other.’ ” (Ibid.) However, plaintiffs fail to cite any precedent for construing a finding
of nonliability as conferring an economic gain or benefit on a party for purposes of the
waiver doctrine. Such a rule would make no sense. A plaintiff who prevails against one
defendant but not others is not barred from appealing the judgment in favor of the other
defendants. By the same token, a defendant found not liable to some but not all plaintiffs
in a multi-plaintiff case is generally not barred from appealing only those portions of the
judgment finding it liable. Here, the losing plaintiffs did not pay or transfer anything of
value to Pacific Bell as a result of the partial judgment in Pacific Bell’s favor. (See
American Alternative Energy Partners II v. Windridge, Inc. (1996) 42 Cal.App.4th 551,
558 [no waiver where defendant did not pay or transfer anything to appellants as a result
of the judgment dismissing their claims].) Merely appealing from the portion of a mixed
judgment imposing liability on the appellant, without more, is not the acceptance of a
benefit from the judgment for purposes of the waiver doctrine.
There is also an exception to the waiver rule where a reversal has no effect on the
appellant’s right to the benefit he or she has “accepted.” (Epstein, supra, 224 Cal.App.3d
at p. 1246.) If this court were to reverse the judgment on the ground that no substantial
13
evidence supported the jury’s verdicts finding breach of contract, or the extent of
damages awarded, as Pacific Bell urges, this would have no effect on the portions of the
judgment in Pacific Bell’s favor. On the other hand, if we reversed based on error in
granting class certification, the entire class judgment would have to be reversed, all class
members would be free to pursue their individual claims against Pacific Bell, and any res
judicata effect of the portions of the judgment in its favor would be nullified.8 On that
supposition, there is no waiver either because the appeal would undo all portions of the
judgment, not just those unfavorable to Pacific Bell.
Plaintiffs further contend Pacific Bell should be judicially estopped from
challenging class certification on appeal because it took an inconsistent position by
successfully advocating for a classwide judgment to be entered on the jury’s verdict on
remand after the decision in Ammari I. Judicial estoppel applies when “(1) the same
party has taken two positions; (2) the positions were taken in judicial or quasi-judicial
administrative proceedings; (3) the party was successful in asserting the first position
(i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are
totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud,
or mistake.” (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183.)
Judicial estoppel generally applies to taking inconsistent factual positions amounting to
an intentional fraud on the court. (ABF Capital Corp. v. Berglass (2005)
130 Cal.App.4th 825, 832.)
Plaintiffs maintain that by seeking entry of a classwide judgment conclusive of the
claims of thousands of absent class members Pacific Bell necessarily took the position
that the trial court’s certification of the class was proper. We disagree. By seeking entry
of a judgment in accordance with the special verdict, Pacific Bell was not taking any
“position”—factual or legal—on the issues of class certification. It was not seeking an
8
Individual claims would also not be time-barred. (See Becker v. McMillin
Construction Co. (1991) 226 Cal.App.3d 1493 and cases cited therein [statute of
limitations on putative class members’ individual claims tolled between commencement
of class action and decertification of class].)
14
adjudication from the court of any such question. It was merely requesting performance
of a ministerial act required by law and by Ammari I’s direction to the trial court to enter
judgment on the jury’s verdict. Judicial estoppel has no application in these
circumstances.
We now turn to the merits of Pacific Bell’s contentions.
C. Class Certification
Pacific Bell submits the trial court’s decision to certify this as a class action was
erroneous and the judgment must be reversed because (1) there was no common evidence
of breach sufficient to demonstrate classwide liability, and (2) the named plaintiffs’
claims were not typical of the claims of advertisers in other directories.
1. Commonality
A trial court’s decision to certify a class “rests squarely within the discretion of the
trial court, and we afford that decision great deference on appeal, reversing only for a
manifest abuse of discretion.” (Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069,
1089 (Fireside Bank); accord, Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.) “A
certification order generally will not be disturbed unless (1) it is unsupported by
substantial evidence, (2) it rests on improper criteria, or (3) it rests on erroneous legal
assumptions.” (Fireside Bank, at p. 1089, citing Sav-On Drug Stores, Inc. v. Superior
Court (2004) 34 Cal.4th 319, 326–327 (Sav-On Drug Stores).)
“Class certification requires proof (1) of a sufficiently numerous, ascertainable
class, (2) of a well-defined community of interest, and (3) that certification will provide
substantial benefits to litigants and the courts, i.e., that proceeding as a class is superior to
other methods. [Citations.] In turn, the ‘community of interest requirement embodies
three factors: (1) predominant common questions of law or fact; (2) class representatives
with claims or defenses typical of the class; and (3) class representatives who can
adequately represent the class.’ ” (Fireside Bank, supra, 40 Cal.4th at p. 1089.) “ ‘As a
general rule if the defendant’s liability can be determined by facts common to all
members of the class, a class will be certified even if the members must individually
prove their damages.’ ” (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th
15
1004, 1022 (Brinker).) In this case, Pacific Bell is contending in substance that no
substantial evidence supported the trial court’s determination that common issues of law
or fact predominated.
“[A] reviewing court is not authorized to overturn a certification order merely
because it finds the record evidence of predominance less than determinative or
conclusive. The relevant question on review is whether such evidence is substantial.”
(Sav-On Drug Stores, supra, 34 Cal.4th at p. 338.) The fact that some issues are
amenable to classwide determination and others are not does not prevent class
certification. The legal standard for commonality is comparative: “The relevant
comparison lies between the costs and benefits of adjudicating plaintiffs’ claims in a class
action and the costs and benefits of proceeding by numerous separate actions— not
between the complexity of a class suit that must accommodate some individualized
inquiries and the absence of any remedial proceeding whatsoever.” (Id. at p. 339 &
fn. 10, italics omitted.)
The trial court’s original certification order relied in part on the fact that putative
class members entered into a uniform standardized contract with Pacific Bell such that
the interpretation of the contract and the nature of the obligation it imposed on Pacific
Bell to deliver directories presented common issues of law and fact. Pacific Bell does not
appear to dispute this premise. In fact, the trial court cited Discover Bank v. Superior
Court (2005) 36 Cal.4th 148, 157, for the proposition that controversies involving widely
used contracts are ideal cases for class adjudication. With regard to liability issues, the
court initially contemplated a liability trial in which liability and damages, if any, would
be determined on an aggregate basis, perhaps based on a statistical sampling of actual
delivery rates around the state in comparison to a uniform, contractually required
minimum delivery rate to be determined by interpretation of the contract, after which the
court and the parties would devise a plan for distributing any damages awarded to the
class members. The trial court understood at that stage of the litigation that it was relying
of necessity on assumptions about how plaintiffs would prosecute their claims,
16
assumptions that changed as the case proceeded closer to trial, causing Pacific Bell to
make two subsequent motions to decertify the class.
By the time of the first such motion, plaintiffs’ plan for a single, classwide
determination of liability had been replaced by a plan to have a proposed verdict form
with lines for each of the 163 directories, and to allow the jury to hear evidence on
selected distribution areas chosen at random or by the parties. While recognizing this
would complicate the trial, the trial court concluded: “Plaintiffs continue to demonstrate
that common issues will predominate on a sufficient number of common critical issues
and that a trial on the contract claim will be both manageable and have benefits for the
Court and the litigants.”
Pacific Bell’s final decertification motion came after the trial court determined
that the contracts obligated it to use good faith and best efforts to deliver the directories,
but did not require any particular delivery percentage or CAC score. Pacific Bell insisted
this precluded proof of breach on a classwide basis. Pacific Bell highlighted factors that
in its view created a “disconnect” between its distribution effort and the results
achieved—factors that would vary between locations within a particular directory area.9
Plaintiffs maintained they could produce “statistical and non-statistical evidence of
[Pacific Bell’s] class-wide conduct,” including internal memos acknowledging ongoing
delivery problems and failure to meet Pacific Bell’s own minimum requirements,
evidence of deficient delivery methods, evidence of the industry standard, and CAC
scores showing a failure to meet internal and industry standards. The trial court agreed
with plaintiffs, finding with regard to liability that common evidence such as industry
standards, Pacific Bell’s past performance, and its efforts and actions in retaining and
supervising the distribution vendors, were sufficient to show the predominance of
9
Pacific Bell stated: “The distribution results will likely be lower in areas with
concentrated populations where English is not the primary language. . . . Areas with
heavy concentrations of controlled access buildings like apartments and condominiums
often see lower penetration . . . than non-secure locations due to refusals, or bulk drops.”
17
common questions. The court also rejected Pacific Bell’s proposal of a subclass for each
directory area.
In this appeal, Pacific Bell attacks certification of the class on somewhat different
grounds, relying primarily on two United States Supreme Court decisions decided after
Pacific Bell’s decertification motions were heard in this case, Wal-Mart Stores, Inc. v.
Dukes (2011) ___ U.S. ___ [131 S.Ct. 2541] (Wal-Mart) and Comcast Corp. v. Behrend
(2013) ___ U.S. ___ [133 S.Ct. 1426] (Comcast). According to Pacific Bell, these cases
stand for the proposition that statistical evidence cannot satisfy a plaintiff’s burden to
establish that liability can be litigated on a classwide basis when liability “turns on the
unique factual context of the defendant’s conduct.” We find these cases distinguishable.
Wal-Mart involved “one of the most expansive class actions ever,” with a
plaintiffs’ class of 1.5 million current and former employees of the store who alleged that
“the discretion exercised by their local supervisors over pay and promotion”
discriminated against women. (Wal-Mart, supra, 131 S.Ct. at p. 2547.) The plaintiffs’
theory was that a discriminatory corporate culture infected the discretionary decision-
making of thousands of Wal-Mart managers leading to pay and promotion decisions
disproportionately favoring male employees. (Id. at p. 2548.) As evidence there were
questions of law and fact common to the plaintiffs’ class, the plaintiffs offered (insofar as
relevant here) (1) statistical evidence about pay and promotion disparities between male
and female employees, and (2) anecdotal reports of discrimination from about 120 female
employees. (Id. at p. 2549.) The court evaluated this evidence and found it insufficient
under the following standard: certification of the case as a class action required
“ ‘significant proof’ ” that Wal-Mart operated under a general policy of discrimination.
(Id. at p. 2553.)
The statistical evidence consisted of a regression analysis conducted at the named
plaintiffs’ behest, using regional and national data, comparing the number of women
promoted into management positions with the percentage of women in the available pool.
(Wal-Mart, supra, 131 S.Ct. at p. 2555.) The study found significant disparities that
could only be explained by gender discrimination, according to the study’s authors.
18
(Ibid.) The court found this evidence about disparities at the regional and national level
did not establish the existence of disparities at individual stores or raise any inference of a
companywide policy of discrimination implemented by discretionary decisions made at
the store level. (Ibid.) Because the Wal-Mart plaintiffs had identified no alleged
discriminatory practice other than delegated discretion, the court found merely showing
that such discretion produced an overall sex-based disparity was insufficient. (Id. at
pp. 2555–2556.) It found the anecdotal evidence even weaker in that regard since the
evidence encompassed only a tiny fraction of Wal-Mart’s employees and stores,
concentrated in a relative handful of states, which failed to demonstrate the company
operated under a general policy of discrimination. (Id. at p. 2556.)
In Comcast, an antitrust class action, the Supreme Court reversed an order
granting class certification because the plaintiffs relied on a regression model that did not
“isolate damages resulting from any one theory of antitrust impact,” despite the fact that
the plaintiffs were limited by other rulings to pursuing damages under only one of the
theories reflected in the model. (Comcast, supra, 131 S.Ct. at p. 1431.) The Court
concluded that “a model purporting to serve as evidence of damages in this class action
must measure only those damages attributable to that theory.” (Id. at p. 1433.)
California courts may look to federal law for guidance on class action procedure in
the absence of California authority. (In re BCBG Overtime Cases (2008)
163 Cal.App.4th 1293, 1298.) There is certainly state law precedent that statistical
evidence can be used to prove liability in California class actions, however. (See, e.g.,
Sav-On Drug Stores, supra, 34 Cal.4th at p. 333 & fn. 6; Bell v. Farmers Ins. Exchange
(2004) 115 Cal.App.4th 715, 749–755; Capitol People First v. State Dept. of
Developmental Services (2007) 155 Cal.App.4th 676, 695–696; Alch v. Superior Court
(2004) 122 Cal.App.4th 339, 380–381; Reyes v. Board of Supervisors (1987)
196 Cal.App.3d 1263, 1279; Stephens v. Montgomery Ward (1987) 193 Cal.App.3d 411,
421.) In any event, we do not read Wal-Mart and Comcast as precluding the use of
statistical evidence in class actions as long as that evidence—either by itself or in
combination with other evidence—is capable of showing liability on a classwide basis.
19
This is substantially a case-by-case determination, not a sweeping rule. Moreover, the
applicable standard in California is not “ ‘significant proof’ ” of classwide liability, as
stated in Wal-Mart, supra, 131 S.Ct. at page 2553, but whether, presuming the existence
of every fact the trial court could reasonably deduce from the record, substantial evidence
supports the trial court’s finding that common issues predominate. (Brinker, supra,
53 Cal.4th at p. 1022.)
Pacific Bell concedes in this case that in addition to the CAC surveys plaintiffs
came forward with evidence of systemic distribution problems—problems with Pacific
Bell’s distribution vendors reflecting “ ‘widespread, ongoing concerns [about
distribution] . . . that the jury could reasonably infer applied to all districts.’ ”10 (Italics
added.) Pacific Bell nonetheless dismisses this evidence as insufficient to sustain class
certification because, if its delivery problems were systemic, the jury would have found
breach of the best efforts requirement in all directory areas across the board. This
conflates different evidentiary standards. To sustain certification, plaintiffs did not have
to establish Pacific Bell’s classwide liability as a fact to the satisfaction of the jury. They
only had to come forward at the certification stage with substantial evidence from which
a reasonable jury could have inferred classwide liability. Plaintiffs clearly did so in this
case. Not only did plaintiffs come forward with evidence of classwide delivery
problems, as Pacific Bell concedes, they also came forward with CAC scores and expert
testimony which, had it been fully accepted by the jury, would have resulted in classwide
(or virtually classwide) liability findings and damages. As pointed out in Ammari I,
plaintiffs argued to the jury—consistent with the jury instructions—that the CAC
evidence could support a baseline standard of performance of anywhere from 96 to 100
10
This evidence included numerous internal memoranda discussing vendor
delivery failures, inadequate staffing, “ ‘cutting corners,’ ” the absence of quality
assurance programs, multiple incidents of book dumping, and the failure of vendors to
achieve minimum delivery requirements.
20
percent of intended recipients, as measured by the CAC surveys.11 Pacific Bell made no
objection at the time that any number in the range proposed was unsupported by
substantial evidence. Had the jury accepted the higher figures urged by plaintiffs—100
percent or 99 percent or even 98 percent—it would have found liability for every or
nearly every directory. The fact the jury did not fully embrace plaintiffs’ position—after
hearing all of the testimony and evidence on both sides—is not particularly relevant to
our review of the trial court’s certification rulings. If representative plaintiffs had the
burden of proving classwide liability at the certification stage as Pacific Bell seems to be
suggesting, trials on the merits would be superfluous in class actions.
Moreover, the statistical and other evidence in issue in this case does not suffer
from the infirmities identified in the Wal-Mart and Comcast cases. First, unlike in those
cases, the statistical data relied on by plaintiffs was not created by their expert for
purposes of the litigation. The CAC data was generated specifically for Pacific Bell and
was considered sufficiently reliable that Pacific Bell (and all members of the industry)
regularly used the same methodology in evaluating their own delivery performance,
vendors, and personnel. Second, plaintiffs’ experts testified without rebuttal that CAC
scores provided an accurate metric for evaluating delivery performance. Third, the
statistical evidence was found to be insufficient in Wal-Mart because it relied on
aggregating data generated from many different units operating independently to make
unfounded generalizations about the conduct of every one of the units. In contrast, the
CAC data was disaggregated. Each CAC score directly measured Pacific Bell’s
performance in the delivery of a single directory. The only generalization involved in the
creation of those scores was an extrapolation from the sample of Pacific Bell customers
surveyed in a directory area to the area’s customer population. Random sampling for that
type of purpose is a pretty basic statistical technique amenable to objective evaluation by
11
This evidence included not only the CAC survey results but evidence of industry
standards, Pacific Bell’s own internal policies and standards for delivery, Pacific Bell’s
promotional materials, Pacific Bell’s standards for its third party distribution vendors,
and Pacific Bell’s historic performance.
21
experts. We do not view Wal-Mart as banning the use of sampling data in class action
cases as long as there is credible (indeed, unrebutted) expert testimony attesting to its
reliability in measuring probative facts, as there was in this case.
Finally, we reject Pacific Bell’s complaint, analogizing to Wal-Mart, that the CAC
scores are defective because they fail to demonstrate the reasons for nondelivery. This is
not a discrimination case. Plaintiffs were not required to prove the reason for each
nondelivery. They were only required to produce evidence from which the jury could
infer what portion of the nondeliveries were due to reasons Pacific Bell could not have
controlled had it exercised its best efforts. Whether the evidence in this case permitted
those types of inferences was essentially the same question that was before the Court of
Appeal in Ammari I. As discussed earlier, the Court of Appeal specifically found the
evidence was sufficient to support the baseline levels the jury used to calculate damages.
By setting CAC baseline levels of 94.5, 89.6, and 89.5 percent for purposes of calculating
damages, the jury was effectively drawing inferences from the evidence as to the
percentage of nondeliveries that were due to factors independent of Pacific Bell’s level of
effort. Under the law-of-the-case doctrine, we need not revisit here the issue of whether
the evidence was in fact sufficient for the jury to make those determinations.
For all of these reasons, we find Wal-Mart and Comcast distinguishable, and reject
Pacific Bell’s argument that plaintiffs failed to show the predominance of common
issues.
2. Typicality
Another aspect of the “community of interest” requirement for class certification
is that the named plaintiffs’ claims must be typical of the class. (Lockheed Martin Corp.
v. Superior Court (2003) 29 Cal.4th 1096, 1104.) Typicality does not require that
plaintiffs’ claims be identical to those of other class members, only that their claims and
the defenses applicable to them are sufficiently similar to those of other class members
that the named plaintiffs are able to adequately represent the class and focus on common
issues. (Classen v. Weller (1983) 145 Cal.App.3d 27, 46; Medrazo v. Honda of North
Hollywood (2008) 166 Cal.App.4th 89, 99 (Medrazo).) Typicality and adequacy
22
requirements apply equally to subclasses. (Aguiar v. Cintas Corp. No. 2 (2006)
144 Cal.App.4th 121, 137.)
“ ‘The test of typicality “is whether other members have the same or similar
injury, whether the action is based on conduct which is not unique to the named
plaintiffs, and whether other class members have been injured by the same course of
conduct.” [Citation.]’ ” (Seastrom v. Neways, Inc. (2007) 149 Cal.App.4th 1496, 1502.)
“It is only when a defense unique to the class representative will be a major focus of the
litigation [citation], or when the class representative’s ‘ “interests are antagonistic to or in
conflict with the objectives of those [s]he purports to represent” ’ [citation] that denial of
class certification is appropriate.” (Medrazo, supra, 166 Cal.App.4th at p. 99.)
Here, Pacific Bell asserts (1) the trial court “effectively” created subclasses by
requiring the jury to determine liability and damages separately for each of the 163
directories, (2) the named plaintiffs advertised in only 8 of the 66 directories for which
the jury found it liable, and (3) the claims of an advertiser in one directory were not
typical of the claims of advertisers in other directories. Based on these premises, Pacific
Bell maintains it is entitled to a reversal of the judgment as to the 58 directories that
assertedly lacked a typical and adequate subclass representative.
We reject Pacific Bell’s claim that the named plaintiffs were not similarly situated
to the advertisers in the other directories in which they did not advertise. Using Pacific
Bell’s illustrative example, the basis of this claim is that one of the named plaintiffs
advertising in the 2002 Oakland directory with a CAC score of 93.7 percent had to prove
the baseline delivery percentage was higher than 93.7 percent to recover, whereas an
advertiser in the 2003 Palo Alto directory only needed to prove the baseline was higher
than 92.6 percent, which was the CAC score for that directory. Although Pacific Bell
finds this presents “an intractable class conflict,” we do not see it that way. The named
plaintiffs and the advertisers in other directories shared the same litigation objective—to
maximize damages by convincing the jury to pick the highest possible baseline delivery
percentage. Pacific Bell fails to explain why the named plaintiff who advertised in the
2002 Oakland directory would have had an incentive to convince jurors to reduce the
23
baselines applicable to any of the other directories. Such an effort would have been self-
defeating. The named plaintiffs’ claims were sufficiently typical of the class because
they involved the same standardized contract and the same alleged breach as in all 163 of
the directories. No subclasses were necessary.
Pacific Bell fails to demonstrate error in the trial court’s class certification rulings.
D. Sufficiency of the Breach of Contract Evidence
1. Jury’s Improper Reliance on CAC Scores
Pacific Bell acknowledges there was some “anecdotal” evidence of delivery
failure other than CAC scores for 11 of the 66 directories for which damages were
awarded but maintains the CAC scores were the only evidence of breach the jury relied
on for the other 55 directories. Pacific Bell urges us to find that both the CAC data and
the evidence it characterizes as anecdotal were insufficient to support the jury’s findings
of breach. In fact, counsel for Pacific Bell stressed at oral argument that the jury—by
purportedly relying exclusively on the CAC survey results— disregarded the trial court’s
instruction that “[t]he contracts do not require Pacific Bell Directory to achieve any
particular result in terms of number or percentage of directories delivered,” and in fact
did exactly what the trial court instructed them not to do by treating the contract as if it
did require a particular delivery percentage.
On appeal, we must assume the jury understood the instructions and correctly
applied them to the evidence unless the contrary is convincingly demonstrated.
(Zuckerman v. Underwriters at Lloyd’s (1954) 42 Cal.2d 460, 478–479.) We indulge all
reasonable inferences to support rather than defeat the jury’s verdict, and presume the
jury reached its verdict on a theory that is supported by the evidence. (Fransen v.
Washington (1964) 229 Cal.App.2d 570, 574; Petersen v. Rieschel (1953)
115 Cal.App.2d 758, 767.)
Pacific Bell fails to persuade us the jury misunderstood or ignored the instructions
given in this case. Although the jury was instructed that the contracts did not require
Pacific Bell to achieve any particular percentage of directories delivered, that does not
mean the jury could not consider the results of Pacific Bell’s delivery efforts, as
24
measured by the CAC surveys, as evidence from which to infer, after the fact, that the
company had breached its obligation to use best efforts. First Union Nat’l Bank v. Steele
Software Sys. Corp. (Md.Ct.App. 2003) 838 A.2d 404 is illustrative. The defendant bank
in that case agreed to use its best efforts to refer certain types of transactions to the
plaintiff. (Id. at p. 412.) The jury determined that “42-52% of [the defendant’s] business
was required to meet the diligence requirement of a best efforts clause under the
circumstances.” (Id. at p. 452.) The jury’s quantitative interpretation of best efforts was
permissible even though the contract “did not create a specific obligation to direct a
certain percentage of [the defendant’s] transactions to [the plaintiff].” (Id. at p. 450.)
The court stated: “We do not read the damage award as an indication that the jury
concluded that the parties made a specific agreement to give a certain percentage, but
rather as a determination by the jury, after the fact, of what level of business would have
resulted from reasonably diligent efforts.” (Ibid.)12
When a contract does not define the phrase “best efforts,” the promisor must use
the diligence of a reasonable person under comparable circumstances. (California Pines
Property Owners Assn. v. Pedotti (2012) 206 Cal.App.4th 384, 395.) Here, the jury
heard testimony that CAC scores of anywhere from 96 to 100 percent of intended
recipients provided a baseline standard of performance in the industry, and that Pacific
Bell itself used 96 percent as the “minimum delivery requirement” for its vendors. The
jury could have reasonably inferred that a failure to achieve distribution results for a
directory at those levels, as measured by a CAC survey, was probative of a failure to use
12
See also Levin v. Grecian (N.D.Ill. 2013) ___ F.Supp.2d ___ [2013 U.S.Dist.
Lexis 76536] at *24 [“although the Agreement did not obligate Levin to actually succeed
in selling anything, a reasonable factfinder could find the admitted quality of Grecian’s
work and the speed with which The Yard was sold once Fishman was brought onboard,
combined with Levin’s failure to sell any of Grecian’s work before then, to be persuasive
evidence that Levin did not exercise his best efforts”]; Carlson Dist. Co. v. Salt Lake
Brewing Co., L.C. (Utah Ct.App. 2004) 95 P.3d 1171, 1178–1179 [sales performance of a
comparable distributor of plaintiff’s beer would be relevant to prove whether defendant
distributor breached best efforts clause, if it occurred under similar circumstances].)
25
best efforts and due diligence in the distribution effort, absent credible evidence that other
factors extrinsic to Pacific Bell’s effort caused the result. We simply disagree with
Pacific Bell’s assertion that while the CAC scores may have constituted admissible
evidence of breach, the “scores alone [could not] constitute substantial evidence of
breach in light of the governing contractual obligations and the instructions given to the
jury.”
We also disagree with Pacific Bell’s premise that the CAC scores were plaintiffs’
only evidence of breach for some directories. As the Court of Appeal pointed out in
Ammari I, supra, A126326, there was evidence of severe, ongoing problems in delivering
directories, reflected in internal memoranda. For example, Pacific Bell acknowledged in
writing that its third party distribution vendor “fail[ed] to perform at the basic
competency level,” requiring implementation of emergency procedures. (Ibid.) There
was evidence Pacific Bell terminated PDC after criticizing its delivery effort during the
first half of the class period and also terminated the replacement distributor for failure to
perform. In its reply brief in this appeal, Pacific Bell agreed with plaintiffs’ position that
in addition to the CAC surveys plaintiffs had put in evidence of systemic distribution
problems reflecting “ ‘widespread, ongoing concerns [about distribution] . . . the jury
could reasonably infer applied to all districts.’ ”13 (Italics added.) Pacific Bell
maintains, however, that the jury could not have relied on any of this evidence in finding
breach, and must have relied solely on the CAC surveys, because it found no breach for
97 of the 163 directories. Not so.
Although the jury could have reasonably inferred the systemic evidence supported
a finding of breach and an award of damages in all or nearly all districts, that was not the
only rational use the jury could have made of that evidence. The jury could have
13
This evidence included numerous internal memoranda discussing vendor
delivery failures, inadequate staffing, “ ‘cutting corners,’ ” the absence of quality
assurance programs, multiple incidents of book dumping, and the failure of vendors to
achieve minimum delivery requirements. Pacific Bell stipulated it was legally
responsible for the delivery performance of each of its distribution vendors.
26
accepted the evidence that delivery problems were systemic and believed CAC survey
results of 96 or 98 or 99 percent were probative of breach, yet rationally decided to
choose a lower baseline figure—94.5 percent in most districts— for purposes of
awarding damages. The jury could have found there was sufficient imprecision in the
CAC methodology, or variation in extrinsic circumstances between districts, or conflict
in the evidence, that it would be unfair to Pacific Bell to find a “breach causing injury”
and award damages unless the CAC survey result was far enough below industry norms
and Pacific Bell’s own internal standards that jurors could be sure it reflected a lack of
adequate effort and diligence on Pacific Bell’s part. In other words, the fact plaintiffs’
evidence of widespread, systemic distribution problems might have supported a jury
verdict even more adverse to Pacific Bell is certainly not a reason to assume the jury
completely disregarded it in reaching the conclusion that Pacific Bell had liability to
some of its directory advertisers.
2. Deficiencies of CAC Data
Pacific Bell also attacks the sufficiency of the CAC survey results on the grounds
those results were “unadjusted,” and addressed only the initial distribution. In using the
term “unadjusted,” Pacific Bell refers to the fact that CAC utilizes a process for some of
its clients—but not used by Pacific Bell in this case—for challenging “no” responses by
having CAC make follow-up calls to determine whether the nondelivery to the
respondent was caused by lack of diligence in the delivery effort, or other factors, such as
customer refusal to accept a delivery or customers whose telephone number is outside the
delivery area.14 We find Pacific Bell’s issues with the CAC survey data go to the weight
14
As part of its unadjusted results, CAC apparently does call respondents back
more than once to verify whether the book was received, but not to determine the reason
for nondelivery. Pacific Bell on some occasions conducted its own follow-up surveys by
calling customers at random who had responded “no” in a CAC survey, and asking them
again if they received a directory. Pacific Bell’s witness said he found “30, 40, 50
percent of the time” these respondents said they had received the book even though they
said “no” on the CAC survey. However, there was no expert testimony validating the
reliability of these follow-up surveys.
27
of that evidence, not its legal sufficiency to support a verdict. Pacific Bell presented no
expert testimony that adjusting the data by recalling and questioning respondents who
answered “no” conformed to accepted survey practices or would quantify its delivery
performance more reliably. It is not at all clear why respondents would have any first-
hand knowledge of the reasons for nondelivery in most cases. Moreover, Pacific Bell
used the unadjusted data to track its own performance and that of its distribution vendors,
and plaintiffs’ expert testified without rebuttal that the unadjusted CAC scores provided a
reliable measure of the percentage of businesses and residences that received a particular
directory. Even assuming the unadjusted survey responses undercounted deliveries, that
effect was canceled out by the fact that the quantitative evidence the jury heard
concerning performance norms and standards—and upon which the jury presumably
arrived at its baseline percentages—was all expressed in terms of the same unadjusted
data. If it was not, that was a matter to be elicited on cross-examination or in rebuttal. It
is not a reason to discount the CAC data entirely as Pacific Bell asks us to do.
Pacific Bell also contends the CAC data only addressed the initial, mostly hand-
delivery distribution15 and failed to account for the success of the overall distribution.
According to Pacific Bell, this means the CAC score cannot constitute substantial
evidence that it breached its obligation to exercise best efforts and due diligence with
respect to the overall distribution.
It is Pacific Bell’s burden to demonstrate the insufficiency of the CAC evidence.
(Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.) The secondary
distribution accounts for only about 20 percent of the directories distributed in each
directory area on average. Approximately one million of the directories distributed in the
secondary distribution are not delivered to customers but are left at public access sites to
be picked up by whoever wants to take them. Pacific Bell admitted it had no way of
knowing what became of these directories. Secondary delivery also included fulfillment
15
About 7 percent of the initial distribution consists of common-carrier delivery to
large users and mail delivery to residences and businesses for which hand-delivery is not
feasible.
28
of telephone orders for directories, and delivering directories to new customers (“new
connects”). While Pacific Bell offered evidence of limited redeliveries to some “lockout”
sites during the secondary distribution, it did not establish its secondary delivery
procedures were designed to or did cure failures in the initial distribution, and it did not
introduce evidence quantifying or estimating how many redeliveries it carried out.16 In
fact, plaintiffs’ expert on directory circulation practices, James Desser, testified that
secondary delivery lacks any systems or procedures for identifying and correcting
deficiencies in the initial distribution. While the initial distribution is intended to be
comprehensive in scope, secondary distribution is “reactive” to call-in orders, new
connects, and the numbers of directories picked up in public places. Finally, Pacific Bell
points to no evidence showing why it would have been improper for the jury to infer the
secondary distribution in each directory area was performed with the same level of effort
as the initial distribution, since it was conducted by the same distribution vendor and
overseen by the same Pacific Bell personnel as the initial distribution.
For these reasons, we find Pacific Bell fails to demonstrate the CAC survey data and
other evidence discussed above was insufficient to support the verdict that Pacific Bell
breached its contractual best efforts obligation.
E. Excessive Damages
Based on the following assertions, Pacific Bell seeks a new trial on damages or, in
the alternative, a reduction by 11/12 in the amount of the judgment: (1) the jury
calculated damages for each directory using the CAC scores which reflect only the hand-
delivery phase of the distribution; (2) the advertising contracts were for one-year terms,
providing for monthly billing; (3) the hand-delivery phase is completed within the first
month or so after publication, while the secondary distribution continues over the balance
of each directory’s in-service year; and (4) plaintiffs failed to prove any delivery failures
in the hand-delivery phase were not cured at some point in the next 11 months of the
16
Although there was testimony Pacific Bell made redeliveries to persons who
said they received no directory on the CAC survey, CAC sampled only 0.2 percent of
Pacific Bell’s customers in a delivery area.
29
contract. According to Pacific Bell, plaintiffs’ theory and the jury’s damages award were
premised on the erroneous assumption that a one-month delay in delivery should be
considered for damages purposes as if it was a failure of delivery for the entire contract
year.17
At the outset, we reject Pacific Bell’s assertion that “[p]laintiffs did not present
any evidence that delivery failures in the hand delivery phase remained uncured during
the secondary distribution phase . . . .” As discussed in the previous section, plaintiffs
offered unrebutted expert testimony that the secondary distribution included no
procedures for identifying and correcting delivery failures occurring in the initial
distribution. Pacific Bell’s very detailed 2002 “Request for Proposal” to its prospective
distribution vendors described the secondary distribution services it required in great
detail without referencing any program to identify and deliver directories to customers
missed in the initial distribution. A summary statement of Pacific Bell’s distribution
policy for California characterized the secondary delivery as encompassing “New
Installations,” “additional or replacement” directories supplied “upon request,” and
distributions through other channels such as access stands and pay phone stations.
The jury could reasonably infer from the evidence that Pacific Bell had no way to
identify or provide directories to customers missed in the initial phase unless they
happened to be part of the tiny population sample contacted by CAC, or called Pacific
Bell to request a directory, or picked one up at a public access site. Secondary
distribution methods that depended so heavily on customer initiative could not be
expected to reach more than a small fraction of the customers missed during a poorly
performed initial distribution. To the extent Pacific Bell did offer limited evidence of
company-initiated redeliveries during the secondary distribution, it made no attempt to
quantify these efforts or to afford the jury any rational way to take them into account in
assessing damages. It was not plaintiffs’ burden to do this. Significantly, while plaintiffs
17
Pacific Bell does not explain the basis for its apparent assumption that all
directories were delivered to customers missed during the hand-delivery phase in the first
month of the secondary distribution.
30
backed up their damages model with expert testimony, Pacific Bell offered no expert
testimony of its own substantiating any alternative damages theory, including the one
proposed in this appeal. Finally, as Ammari I found, there was “overwhelming evidence”
Pacific Bell relied on CAC delivery verification surveys to measure the effectiveness of
its third party distribution vendor’s performance and for other purposes, and that Pacific
Bell required its distribution vendor to ensure that at least 96 percent of the telephone
customers in each directory district receive a directory as measured by the CAC scores.
If the secondary distribution was as effective in curing missed deliveries as Pacific Bell
now contends, it is not at all clear why Pacific Bell and others in the industry would have
placed as much reliance on CAC scores (or similar delivery verification surveys) as they
did, or why the surveys would have been conducted immediately after the initial
distribution was completed instead of waiting until the effect of the secondary
distribution would be reflected in the results.
There was thus ample evidence in the record from which the jury could infer the
secondary distribution did not cure shortfalls in the initial distribution effort. In the end,
Pacific Bell failed to persuade the jury otherwise. The jury even ignored plaintiffs’
proposal, made in closing argument, that it reduce their damage awards by 18 percent
across the board if jurors felt the CAC data did not adequately take the secondary
distribution into account. Although the jury did not make that adjustment, it did award
plaintiffs substantially less than the lowest amount of damages they had requested, as
pointed out in Ammari I. For the reasons stated, we find Pacific Bell’s present challenge
to the jury’s award unsubstantiated by the record.
III. DISPOSITION
The judgment is affirmed.
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Margulies, Acting P.J.
We concur:
_________________________
Banke, J.
_________________________
Becton, J.*
*
Judge of the Contra Costa County Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
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