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March 18, 2013 Articles

Ascertainability in Alleged Misrepresentation Cases

Defense counsel should attack class definitions early.

By Todd Willis

“The existence of an ascertainable class of persons to be represented by the proposed class representative is an implied prerequisite of Federal Rule of Civil Procedure 23.” John v. Nat’l Sec. Fire & Cas. Co., 501 F.3d 443, 445 (5th Cir. 2007). This implied prerequisite stems from the requirement in Rule 23(c)(1)(B) that “[a]n order . . . certifyi[ng] a class action must define the class and the class claims, issues, or defenses.” In keeping with this provision, courts have held that an order certifying a class must include, among other things, “a readily discernible, clear, and precise statement of the parameters defining the class or classes to be certified.” Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 592 (3d Cir. 2012) (quotation omitted). In other words, “the class sought to be represented must be adequately defined and clearly ascertainable.” Union Asset Mgmt. Holding A.G. v. Dell, Inc., 669 F.3d 632, 639 (5th Cir. 2012).

Several unique issues related to ascertainability arise in actions based on misrepresentations or false information allegedly contained in documents or advertisements presented by a defendant or given to consumers. Courts will examine whether all of the putative class members were exposed to the same or similar alleged misrepresentations on which the class claims are based. When putative class members have received varying iterations of documents that do not contain uniform representations, the only cure may be to narrow the class definition. Additional problems may arise if some putative class members purportedly relied on oral representations in addition to or in conjunction with the documents containing the alleged misrepresentations. If these problems are not cured, other issues arise in addition to ascertainability, including standing and typicality.

Ascertainability is a particularly important issue because “[w]here it is facially apparent from the pleadings that there is no ascertainable class, a district court may dismiss the class allegation on the pleadings.” John, 501 F.3d at 445. Defense counsel should attack class definitions early when it is possible that not all of the putative class members received the allegedly same offending information or unclear whether they did so.

Uniform Documents
A class action premised on alleged misrepresentations made in the defendant’s documents must be defined so that the same disputed statements were made to all members of the putative class. Lymburner v. U.S. Fin. Funds, Inc., 263 F.R.D. 534, 539 (N.D. Cal. 2010). In Lymburner, the plaintiff alleged violations of the Truth in Lending Act and violations of California statutory and common law, because the loan documents for her residential mortgage allegedly did not disclose, among other things, “that, for the first three years, the payments would not even satisfy the interest owed, resulting in negative amortization.” 263 F.R.D. at 537. The court initially found the class definition “inadequate” and “ordered the parties to meet and confer in an effort to modify the class definition.” Id. at 536. After the parties proposed a revised class definition, the court found that the class was “ascertainable, particularly because Plaintiff has stated that only one set of the same loan documents is at issue, and there is no showing to the contrary.” Id. at 539. The court further explained that “class membership here is not based on oral misrepresentations or on documents that some class members may not have received, which would weigh against ascertainability.” Id.

Similarly, the complaint in Fradis v., 2011 WL 7637785 (C.D. Cal. Dec. 2, 2011), did not make clear, at least according to the defendant, whether all class members received the alleged misrepresentation. In other words, the complaint was ambiguous “as to whether all registrants were falsely informed that registration would be free, or whether this misrepresentation was made only to users who were directed to the website through the pop-up advertisements and false news reports.” Id. at *11. The court ultimately found, however, that the class was ascertainable, because the complaint could be read to allege that all class members “were subject to the same false representation” even if class members were subject to other representations.

In other instances, courts have not been as forgiving and the class did not survive. In Leider v. Ralph, 387 F. Supp. 2d 283, 297 (S.D.N.Y. 2005), for example, class certification of a consumer claim was denied because “plaintiffs do not point to any specific advertisement or public pronouncement . . . which was undoubtedly seen by all class members.” In Van West v. Midland National Life Insurance Co., 199 F.R.D. 448, 451–52 (D.R.I. 2001), the class definition was not ascertainable because representations varied from purchaser to purchaser, including oral representations. The court noted that “[t]he proposed class must be precisely defined and its members must be ascertainable through the application of stable and objective factors so that a court can decide, among other things, who will receive notice, who will share in any recovery, and who will be bound by the judgment.” Id. at 451 (quotations omitted). The Van West court also noted that ascertainability is not satisfied when the class is defined simply as consisting of all persons who may have been injured by generically described wrongful conduct allegedly engaged in by a defendant; more specificity of the alleged misrepresentations and the documents containing them is required.

Moreover, Palmer v. Stassinos, 236 F.R.D. 460, 463 (N.D. Cal. 2006), demonstrates that courts do not want to spend time and resources after a class has been certified hearing disputes between the parties about which individuals are or are not within the class definition. After the court granted in part their motions for class certification, the plaintiffs in Palmer amended their Fair Debt Collection Practices Act class as follows:

All persons to whom defendant mailed at least one collection letter since July 27, 2003 containing the same or similar demands or representation to those in the letters defendant sent to named plaintiff(s), in an attempt to collect a dishonored check written in California for personal, family, or household purposes.

236 F.R.D. 463 (N.D. Cal. 2006).

The newly proposed class definition failed, however, because its “boundaries” were “ill-defined and the parties would be likely to spend much time litigating whether certain letters fall within this proposed definition.” Id. The court determined that the vague definition made it impossible “to ascertain whether [plaintiffs’] claims are typical of the proposed classes as a whole.” In fact, the court required that the class definition “specify the alleged infirmities of the letters that are the subject of plaintiffs’ complaints.” Id.

Ascertainability also is a problem when plaintiffs simply allege a class of persons or entities who purchased products “falsely advertised.” Brazil v. Dell, Inc., 585 F. Supp. 2d 1158 (N.D. Cal. 2008). In Dell,plaintiffs’ counsel defined the class as

all persons or entities who are citizens of California who purchased from Dell computer products for personal or business use that (1) Dell falsely advertised as discounted from Dell’s regular sales price; (2) Dell falsely advertised as including “free” upgrades and/or “free” add-on products and/or services; and/or (3) Dell falsely advertised as being subject to a rebate discount from Dell’s regular price.

 585 F. Supp. 2d at 1167.

The Dell court struck the class allegations, reasoning that “it would be necessary for the court to reach a legal determination that Dell had falsely advertised” before it could be “determine[d] who should be a member of these classes.” Id. Specific misrepresentations must be stated in the class definition, and it must be clear who received them and in which documents.

Kent v. SunAmerica Life Ins. Co., 190 F.R.D. 271 (D. Mass. 2000), also is illustrative, demonstrating that, when multiple versions of documents are used during the class period, a class is not ascertainable if the representations are not uniform within the various iterations. In Kent, the defendant sold whole life insurance allegedly with the promise that the policies would become self-funding and the premiums would “vanish.” The plaintiffs claimed that illustrations used to describe future performance of the insurance policies misled purchasers to believe that after a certain number of premium payments no further premiums were required. The court found the class definition flawed because it was unclear whether the purportedly misleading content of the illustrations received by class members varied. This ambiguity gave rise to other issues that also precluded class certification, including possible differences in sales techniques and oral representations made by sales representatives about “vanishing” premiums. Accordingly, the court held that “no ‘typical’ case is presented by these plaintiffs, and their separate claims present few common questions of law and fact.” Id. at 279. Typicality is not the only additional problem, however, that begins to percolate when a class is poorly defined.

A class that is not clearly ascertainable also is likely to raise standing obstacles for certain putative class members. In Sanders v. Apple, Inc., 672 F. Supp. 2d 978, 991 (N.D. Cal. 2009), for example, “the class definition include[d] all persons within the United States who own a 20-inch Aluminum iMac.” The court noted that the definition “necessarily include[d] individuals who did not purchase their 20-inch Aluminum iMac, individuals who either did not see or were not deceived by advertisements, and individuals who suffered no damages”; the court held that “[s]uch individuals would lack standing to bring these claims.” Id.

Likewise, in O’Shea v. Epson America, Inc., 2011 WL 4352458, at *11 (C.D. Cal. Sept. 19, 2011), the court identified a standing issue, which stemmed from an ascertainability problem. The class definition was based on Epson’s alleged representation that customers would need to “replace only the ink that [they] need” when, in fact, to print in black ink all of the printer’s ink cartridges had to work. The standing and ascertainability issues arose when “Epson point[ed] to evidence showing that individuals who purchased certain models of class printers from certain third-party online sources, such as, were not exposed to the allegedly deceptive representation before they purchased their printers.” Id. (citations omitted). Accordingly, the court denied class certification, finding that “the putative class is defined such that it necessarily encompasses individuals whose purported injury cannot fairly be traced to Epson’s alleged misrepresentation on the printer box.” Id.

Defense counsel should carefully examine the class definition to determine whether“the application of stable and objective factors” are present, “so that a court can decide, among other things, who will receive notice, who will share in any recovery, and who will be bound by the judgment.” Van West, 199 F.R.D. at 451. If such factors are lacking, a motion to dismiss or to strike class allegations may be the first line of defense to a putative class action.

Keywords: litigation, class action, derivative suits, ascertainability, class certification, Federal Rule of Civil Procedure 23, defense, putative class

Todd Willis – March 18, 2013