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Circuits Split on Class Action Certification Requirements

Daily Business Review
By Carl Goldfarb, August 24, 2015

A federal court of appeals decision recently created a sharp circuit split regarding the requirements for certifying class actions in cases involving consumer purchases of inexpensive items where consumers are not likely to have retained their receipts.

On one side is the U.S. Circuit Court of Appeals for the Third Circuit, which has adopted a strict rule against relying solely on affidavits by putative class member to self-identify as members of the class. On the other side is the Seventh Circuit, which recently issued a detailed critique of the Third Circuit's analysis and rejected its holding regarding the requirements for ascertaining class membership.

Somewhere in between, but far closer to the Third Circuit, is the Eleventh Circuit, which earlier this summer followed the Third Circuit but arguably in a more nuanced opinion and became the second federal court of appeals to adopt a more stringent interpretation of the requirement that class membership be readily ascertainable.

This circuit split may well be outcome determinative in some cases, especially indirect purchaser antitrust claims and claims under state consumer protection laws.

Even though Federal Rules of Civil Procedure 23 does not mention ascertainability, courts have long considered it to be an implicit Rule 23 requirement. Traditionally, courts considered a class ascertainable if plaintiffs specified an objective measure for determining class membership.

Courts have found a class was not ascertainable if the criteria for determining class membership were too imprecise (e.g. residents active in the peace movement) or required a subjective analysis (e.g. individuals who felt discouraged from applying for government energy assistance).

In a series of cases culminating in Carrera v. Bayer, (2013), the Third Circuit tightened its requirements for ascertainability, which it held required both objective criteria and an "administratively feasible" way to apply those criteria without "individualized fact-finding or mini-trials." The court "cautioned against approving a method that would amount to no more than ascertaining by potential class members' say so."

Low-Value Class

The court said requiring defendants "to accept as true absent persons' declarations that they are members of the class, without further indicia of reliability, would have serious due process implications." The court dismissed the argument that the due process clause was not implicated provided defendants' total liability would not depend on the accuracy of the affidavits, holding that fraudulent affidavits might prejudice actual class members by diluting the recovery.

The Third Circuit also asserted that if class members' recovery would be materially diluted, those class members could argue they were not adequately represented and so not bound by the resolution of the case, to the detriment of defendants.

In Mullins v. Direct Digital, (July 28, 2015), a unanimous panel of the Seventh Circuit, repudiated the Third Circuit's ascertainability analysis, saying the Third Circuit's "stringent version of ascertainabilty" does not further any interest that is not already adequately protected by the Rule 23's explicit requirements but "effectively bars low-value consumer class actions, at least where plaintiffs do not have document proof of purchase."

The court concluded that administrative feasibility concerns should be addressed under Rule 23(b)(3)'s requirement that the class device be "superior to other available methods for fairly and efficiently adjudicating the controversy." That provision, the court said, requires a comparative analysis, taking into account both the costs and benefits of the class device.

The court noted that "in many cases where the heightened ascertainability requirement will be hardest to satisfy, there realistically is no other alternative to class treatment." Thus, the Seventh Circuit said courts should consider creative alternatives, and refuse to certify such classes on manageability grounds only as a last resort.

The court found defendants had a due process right to challenge class membership where it would impact their total damages, but said that defendants could do so as part of a back-end claims process, and that there was no reason class members could not self-identify by affidavit provided defendants could challenge those affidavits at the appropriate time.


Finally, the court said the Third Circuit's concern for absent class members was misplaced because absent certification they would recover nothing because in these cases "only a lunatic or a fanatic" would litigate the claim individually, and that absent class members could be bound by the decision.

In Karhu v. Vital Pharmaceuticals, (June 9, 2015), the Eleventh Circuit followed the Third Circuit's lead in Carrera and denied certification of a proposed class of consumers who purchased defendant's dietary supplement. The district court rejected reliance on self-identifying affidavits by putative class members as susceptible to fraud and mistakes and violative of defendants' due process rights.

The Eleventh Circuit endorsed the district court's analysis in an unpublished decision that is not binding precedent but may be cited as persuasive authority. The Eleventh Circuit said a class must be ascertainable based on "objective criteria" using "a manageable process that does not require much, if any, individual inquiry."

While it did not definitively prohibit self-identification via affidavit, the Eleventh Circuit noted the same concerns as the district court and said: "A plaintiff proposing ascertainment via self-identification, then must establish how the self-identification method proposed will avoid the potential problems just described." The Eleventh Circuit also endorsed the Third Circuit's analysis regarding the impact of reliance on self-identifying affidavits on defendants' due process rights. In a concurring opinion, Judge Beverly Martin argued that self-certification should suffice if: each class member's claim is relatively small because then it is less likely consumers will submit fraudulent affidavits and there is no non-offending product with a confusingly similar name because then it is less likely that consumers will submit good faith but erroneous declarations.

"To hold otherwise," Martin wrote, "rejecting affidavits as a legitimate means of class identification in every case—would make it considerably more difficult for consumers to bring class actions on small-dollar products where consumers and companies are unlikely to keep or retain records of purchases."

Carl Goldfarb is a partner in the Fort Lauderdale office of Boies, Schiller & Flexner, who regularly represents plaintiffs and defendants in class actions.

Reprinted with permission from the August 24, 2015 edition of the Daily Business Review © 2015 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.

Related Lawyer: Carl E. Goldfarb

Related Practice: Class Actions