Third Circuit Issues Opinion on Ascertainability

We have posted before about the potential importance of the implicit requirement under Rule 23 that a class be ascertainable under the definition proposed by plaintiffs.  Earlier this week, the Third Circuit vacated class certification of a class of WeightSmart supplements purchasers on the basis of ascertainability.  See Carrera v. Bayer Corp., No. 12-2621 (3d Cir. 8/21/13).


Last year the Third Circuit had decided Marcus v. BMW of North America, LLC, in which it held “[i]f class members are impossible to identify without extensive and individualized fact-finding or mini-trials, then a class action is inappropriate.” 687 F.3d 583, 593 (3d Cir. 2012). The court explained that if class members cannot be ascertained from a defendant's records, there must be a reliable, administratively feasible alternative; the court cautioned against approving a method that would amount to no more than ascertaining by potential class members' say so. Id. at 594. A plaintiff does not satisfy the ascertainability requirement if individualized fact-finding or mini-trials will be required to prove class membership. Id. at 593. Administrative feasibility means that identifying class members is a manageable process that does not require much, if any, individual factual inquiry.

The court of appeals explained that the ascertainability requirement serves several important objectives. First, it eliminates serious administrative burdens that are incongruous with the efficiencies expected in a class action by insisting on the easy identification of class members. Second, it protects absent class members by facilitating the best notice practicable under Rule 23(c)(2) in a Rule 23(b)(3) action. Third, it protects defendants by ensuring that those persons who will be bound by the final judgment are clearly identifiable. If a class cannot be ascertained in an economical and administratively feasible manner, any significant benefits of a class action are lost.

Accordingly, a trial court should ensure that class members can be identified without extensive and individualized fact-finding or mini-trials, a determination which must be made at the class certification stage.  Class ascertainability is an essential prerequisite of a class action, at least with respect to actions under Rule 23(b)(3). Marcus, 687 F.3d at 592-93. There is „no reason to doubt that the “rigorous analysis” requirement for trial courts considering class certification applies with equal force to all Rule 23 requirements. Accordingly, said the court, a plaintiff must show, by a preponderance of the evidence, that the class is currently and readily ascertainable based on objective criteria, and a trial court must undertake a rigorous analysis of the evidence to determine if the standard is met.

Of great interest to our readers is the court of appeal's analysis of the due process implications of ascertainability. In this case, the ascertainability question was whether each class member purchased WeightSmart in Florida. If this were an individual claim, a plaintiff would have to prove at trial that he purchased WeightSmart. A defendant in a class action has a due process right to raise individual challenges and defenses to claims, and a class action cannot be certified in a way that eviscerates this right or masks individual issues. See McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 231-32 (2d Cir. 2008) (rejecting a “fluid recovery” method of determining individual damages, in which aggregate damages would be based on estimates of the number of defrauded class members and their average loss), abrogated on other grounds by Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008); see also Dukes, 131 S. Ct. at 2561 (rejecting a method of class certification in which a sample set of class members would be used to extrapolate average damages). A defendant has a similar, if not the same, due process right to challenge the proof used to demonstrate class membership as it does to challenge the other elements of a plaintiff's claim. To force a defendant to accept as true the absent class members' declarations that they are members of the class, without further indicia of reliability, would have serious due process implications.  Ascertainability thus helps provide a measure of due process by requiring that a defendant be able to test the reliability of the evidence submitted to prove class membership.


Here, Carrera advanced two ways to ascertain the class: first, by retailer records of online sales and sales made with store loyalty or rewards cards; second, by affidavits of class members, attesting they purchased WeightSmart and stating the amount they purchased (despite the fact that in named plaintiff's own deposition testimony, he failed to remember when he purchased WeightSmart and confused it with WeightSmart Advanced and other generic or similar products, none of which are part of this litigation). The Third Circuit concluded this evidence did not satisfy the ascertainability requirement.  There was no evidence that a single purchaser of WeightSmart could be identified using records of customer membership cards or records of online sales. There was no evidence that retailers even have records for the relevant period.  As to the second, this argument failed because it did not address a core concern of ascertainability: that a defendant must be able to challenge class membership. 

Another key feature for our readers relates to plaintiff's claim that because he was proceeding under a state consumer fraud act (Florida's FDUTPA) which allegedly did not require individual proof of reliance, the total amount of damages that defendant would pay (the total sales in the state in the class period) did not change -- only which class member got what amount. Under Carrera's view, if fraudulent or inaccurate claims were paid out, the only harm was to other class members. But ascertainability protects absent class members as well as defendants, said the court, so Carrera's focus on defendant alone was misplaced. It would be unfair to absent class members if there was a significant likelihood their recovery will be diluted by fraudulent or inaccurate claims. In this case, there was the possibility that Carrera's proposed method for ascertaining the class via affidavits would dilute the recovery of true class members.  The defendant still had an interest in ensuring it pays only legitimate claims. If fraudulent or inaccurate claims materially reduce true class members' relief, these class members could argue the named plaintiff did not adequately represent them because he proceeded with the understanding that absent members may get less than full relief. When class members are not adequately represented by the named plaintiff, they potentially are not bound by the judgment.

Thus, the case could be an important precedent for defendants, especially those facing class actions asserting fraud allegations about products for which detailed, accurate receipts likely no longer exist.

Case remanded for further limited discovery on the issue, given the timing of Marcus.


 

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