May 24, 2016 Articles

Rule 23's Implicit Ascertainability Requirement: A Brewing Class Action Controversy

By Lindsay Breedlove

The modern era of class action litigation began with the 1966 amendment of Rule 23. Rule 23 thereafter provided that courts should determine “[a]s soon as practicable” whether a class “is to be so maintained.” Although the rule set forth explicit criteria for class certification, it made no mention of the procedures or standards by which a court should determine whether a class action was appropriate, did not note a specific time when proponents must seek certification or when a court must issue a certification decision, did not require courts to conduct class certification hearings, and did not indicate what burdens of proof, if any, the parties to class litigation bear on class issues.

Not surprisingly, in the years that followed, courts entertained class certification motions on an ad hoc basis. Throughout the 1980s and early 1990s, courts willingly certified class actions based on the plaintiffs’ pleadings alone; indeed, some defaulted to a presumption favoring class certification. See, e.g., Linda S. Mullenix, “Abandoning the Federal Class Action Ship: Is There Smoother Sailing for Class Actions in Gulf Waters?,” 74 Tul. L. Rev. 1709, 1715 (2000). Even so, the word “ascertainable”—a buzzword today—appeared frequently enough in case law for authors Charles Alan Wright and Arthur Miller to note in their first edition of Federal Practice and Procedure that although “the class does not have to be so ascertainable that every potential member can be identified at the commencement of the action, . . . the general outlines of the membership of the class must be determinable at the outset of the litigation.” 7 C. Wright & A. Miller, Federal Practice and Procedure § 1760, at 580 (1972).

The nonchalance that dominated class certification for the first 30 years under the new Rule 23 began to fade by the mid-1990s, when courts and commentators increasingly focused on class action abuse. E.g., Susan Koniak, “Class Action Against Class Counsel,” 1 J. Inst. Study Legal Ethics 249 (1996). In 1995, the Manual for Complex Litigation recognized that “[t]he decision on whether or not to certify a class . . . can be as important as decisions on the merits of the action and should be made only after consideration of all relevant evidence and arguments presented by the parties.” Manual for Complex Litigation (Third) § 30.1 (1995). And, indeed, the Supreme Court eventually held that Rule 23 sets forth more than a mere pleading standard. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011).

Today, the jurisprudential arc has turned toward even more scrutiny of class actions. All federal circuits apply the “rigorous analysis” standard when assessing class certification motions. See generally Ian Simmons, Alexander P. Okuliar & Nilam A. Sanghvi, “Without Presumptions: Rigorous Analysis in Class Certification Proceedings,” Antitrust, Summer 2007, at 61. Although “rigorous analysis” does not hold a consistent meaning across circuits, presiding judges now seek evidence that the underlying claims and defenses are capable of proof on a class-wide basis. Dukes, 564 U.S. at 350. That heightened scrutiny is reflected in Rule 23 itself now, too. For example, in 2003 Rule 23(c)(1)(A) was amended to encourage discovery into certification requirements and to avoid premature certification decisions. See In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 318–19 (3d Cir. 2008).

The 2003 amendments to Rule 23 also added an explicit requirement in Rule 23(c)(1)(B) that a class certification order “define the class and the class claims, issues, or defenses”—a change that some suggest sparked the current focus on ascertainability. Even before the 2003 changes took effect in December of that year, however, courts had begun to ask with increasing frequency whether proposed classes met “the threshold requirement of ascertainability.” Dunnigan v. Metro. Life Ins. Co., 214 F.R.D. 125, 135 (S.D.N.Y. 2003). The 2004 Manual for Complex Litigation took up the charge, explaining that “[a]lthough the identity of individual class members need not be ascertained before class certification, the membership of the class must be ascertainable.” Manual for Complex Litigation (Fourth) § 21.222 (2004). With regard to Rule 23(b)(3), the manual explained that “individual class members must receive the best notice practicable and have an opportunity to opt out,” rendering an identifiable class necessary. Id. “An identifiable class exists,” it continued, “if its members can be ascertained by reference to objective criteria.” Id.

Despite this new language, from the early 2000s through most of 2013, defendants only occasionally challenged the ascertainability of proposed classes. Courts most often rejected such challenges with statements like “[t]he standard for ascertainability is not demanding,” Ackerman v. Coca-Cola Co., No. 09-cv-395, 2013 U.S. Dist. LEXIS 184232, at *61 (E.D.N.Y. July 17, 2013), allowing the “slow and burdensome” manual review of files to ascertain class membership as long as those files contained objective information, Dunnigan v. Metro. Life Ins. Co., 214 F.R.D. 125, 136 (S.D.N.Y. 2003). Courts within the Ninth Circuit took a somewhat more aggressive tack, occasionally suggesting that it must be “administratively feasible for the court to determine whether a particular individual is a member” for the class to qualify as ascertainable. Keegan v. Am. Honda Motor Co., 284 F.R.D. 504, 521 (C.D. Cal. 2012). Litigants nonetheless seemed to focus on predominance and commonality issues—hot topics in the Supreme Court at the time—as they waged class certification battles.

That changed in August 2013 when the Third Circuit decided Carrerra v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013). The year before, the appellate court had set out its understanding of the ascertainability requirement in Marcus v. BMW of North America, LLC, 687 F.3d 583 (3d Cir. 2012). The court concluded in Marcus that Rule 23 indeed contained an implicit ascertainability requirement and that such a requirement served three important goals:

[I]t eliminates serious administrative burdens that are incongruous with the efficiencies expected in a class action by insisting on the easy identification of class members[,] . . . protects absent class members by facilitating the best notice practicable under Rule 23(c)(2) in a Rule 23(b)(3) action[,] . . . [and] protects defendants by ensuring that those persons who will be bound by the final judgment are clearly identifiable.

Id. at 593.

To serve those goals, the class must be both (1) “currently and readily ascertainable based on objective criteria” and (2) capable of identification “without extensive and individualized fact-finding or mini-trials.” Id. at 592–93.

Adopting Marcus’s two-pronged ascertainability approach as its central holding, the Third Circuit concluded in Carrerra that the class of WeightSmart purchasers was not ascertainable and rejected each of the plaintiff’s proposals for determining class membership. The plaintiff could not rely on retailer records of online sales and sales using customer membership cards because “there [was] no evidence that a single purchaser of WeightSmart could be identified” using these records. Carrerra, 727 F.3d at 308–9. Nor could the plaintiff rely on affidavits of class members stating that they purchased WeightSmart and specifying the amount paid, the court held, because such a system would deny Bayer the opportunity to challenge class membership. Id. at 309. The court grounded its ultimate determination in due process, holding that if the plaintiff had brought an individual claim, the defendant would have the right to challenge whether the plaintiff had, in fact, purchased the product. The right to mount such a challenge does not disappear because the plaintiff alleges class claims. The court emphasized that “a class action cannot be certified in a way that eviscerates this right or masks individual issues.” Id. at 308. In short, “[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 elements of a plaintiff’s claim.” Id.

Several other circuit courts followed suit. In Karhu v. Vital Pharmaceuticals, Inc., 621 F. App’x 945 (11th Cir. 2015), the Eleventh Circuit affirmed that “[a] plaintiff cannot establish ascertainability simply by asserting that class members can be identified using the defendant’s records; the plaintiff must also establish that the records are in fact useful for identification purposes, and that identification will be administratively feasible.” Id. at 948. Nor could class members self-identify unless the plaintiff could establish at the class certification stage that self-identification would be “administratively feasible and not otherwise problematic.” Id. Although the plaintiff attempted to overcome Carrerra’s logic by arguing that “defendants have no due-process right against unverified self-identification when total liability will be established at trial, and will not change depending on the number of claims actually made,” the Eleventh Circuit was not persuaded. Id. at 948–49.

The First, Second, and Fourth Circuits have adopted similar ascertainability requirements. Despite certifying a class, the First Circuit explained the need to ensure at the certification stage that the mechanisms for substantiating a would-be claimant’s bona fides be “‘administratively feasible,’ and protective of defendants’ Seventh Amendment and due process rights.” In re Nexium Antitrust Litig., 777 F.3d 9, 19 (1st Cir. 2015) (quoting Carrerra, 727 F.3d at 307). In Brecher v. Republic of Argentina, 802 F.3d 303 (2d Cir. 2015), the Second Circuit required that the class be defined by reference to objective class criteria and that those criteria be applied via an administratively feasible method. A class of Argentinian bond purchasers could not be ascertained, it held, because “[e]ven if there were a method by which the beneficial interests [from bond sales] could be traced, determining class membership would require the kind of individualized mini-hearings that run contrary to the principle of ascertainability.” Id. at 306. Finally, in EQT Production Co. v. Adair, 764 F.3d 347 (4th Cir. 2014), the Fourth Circuit explained that “[it] ha[s] repeatedly recognized that Rule 23 contains an implicit threshold requirement that the members of a proposed class be ‘readily identifiable.’” Id. at 358.

By contrast, the Sixth and Seventh Circuits have rejected Carrerra’s heightened ascertainability requirement. In Mullins v. Direct Digital LLC, 795 F.3d 654 (7th Cir. 2015), the Seven Circuit upheld the trial court’s decision to certify a class because its membership could be determined by reference to objective criteria, even if those criteria could not be applied in an administratively feasible manner. It described Carrerra and its progeny as “impos[ing] a new requirement” and “mov[ing] beyond examining the adequacy of the class definition itself to examine the potential difficulty of identifying particular members of the class and evaluating the validity of claims they might eventually submit.” Id. at 657. In Rikos v. Procter & Gamble Co., 799 F.3d 497 (6th Cir. 2015), the Sixth Circuit agreed, holding that the Carrerra approach “would undermine the very purpose of class action remedies” by making class certification more difficult. Id. at 525–26. The court approved the same methods that Carrerra and others had rejected for ascertaining the proposed class: a “substantial review” of the defendant’s internal data and “the use of receipts, affidavits, and a special master to review individual claims.” Id.

The defendants in both the Sixth and Seventh Circuit cases filed petitions for certiorari, and many commentators thought the Supreme Court might resolve the brewing circuit split in the October 2015 term. But in its first conference following Justice Antonin Scalia’s death, the Court declined to hear Direct Digital; it reached the same conclusion regarding Rikos in late March 2016. Although the Supreme Court, as is customary, issued no explanation for why it denied certiorari, Justice Scalia’s absence may have played some role. Since 2010, Justice Scalia wrote majority opinions in 5­–4 splits upholding contractual waivers of class arbitration, questioning class-wide damages models, and requiring a strict interpretation of what constitutes common questions of law and fact sufficient to maintain a class action under Rule 23. The eight-member court may very well have perceived a likely 4–4 split if it had decided Direct Digital or Rikos without a ninth justice.

In the meantime, litigants in circuits whose courts of appeals have not yet ruled on the ascertainability issue are likely to fall back on the arguments that worked for the victors in other jurisdictions. Defendants may stress that Rule 23 is “grounded in due process,” Taylor v. Sturgell, 553 U.S. 880, 901 (2008), and that the Rules Enabling Act prohibits courts from using Rule 23 in any way that would “abridge, enlarge or modify any substantive right,” 28 U.S.C. § 2072(b). Justice Scalia’s recent precedent may also grace their briefs’ pages: In Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), the late justice stressed a “class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Id. at 1432. And in American Express Co. v. Italian Colors Restaurant, Inc., 133 S. Ct. 2304 (2013), Justice Scalia wrote for the majority that Rule 23 “imposes stringent requirements for certification that in practice exclude most claims.” Id. at 2310. When plaintiffs argue in favor of class certification despite defendants’ ascertainability arguments, they will likely note that Rule 23 does not contain an express ascertainability requirement and that the relatively new addition of the administrative feasibility prong generally threatens the class action mechanism.

The extent to which any of those arguments prevails in the yet undecided circuits or ultimately in the Supreme Court may turn not on their content but on factors somewhat beyond the litigants’ control. For example, the extent to which a given court perceives that heightened ascertainability threatens the class action mechanism may very well play a role. The Sixth and Seventh Circuits have shown some reluctance in recent years to undercut class claims, suggesting that those circuits’ approaches to ascertainability may have followed broader circuit trends. For example, when the Supreme Court remanded “moldy washer” cases to the Sixth and Seventh Circuits following Comcast, both circuit courts reaffirmed the propriety of class certification. See In re Whirlpool Corp. Front-Loading Washer Prods. Liab. Litig., 722 F.3d 838, 845 (6th Cir. 2013); Butler v. Sears, Roebuck & Co., 727 F.3d 796, 798 (7th Cir. 2013). The Seventh Circuit in particular did so by noting that “[i]t would drive a stake through the heart of the class action device . . . to require that every member of the class have identical damages.” Id. at 800; see also Suchanek v. Sturm Foods, Inc., 764 F.3d 750, 756 (7th Cir. 2014) (reversing denial of class certification on grounds that district court extended commonality and predominance requirements too far).

At least one additional set of factors may influence such ascertainability decisions and thus bears noting. To the extent a proposed class definition is driven by particularly stringent commonality and predominance requirements in a given jurisdiction, that definition may include carve-outs that render it substantially more difficult to ascertain class membership by reference to objective and administratively feasible criteria than would be the case if the class could be defined more broadly. Put differently, definitional reactions to commonality and predominance jurisprudence may drive plaintiffs to adopt class definitions that make their proposed classes harder to ascertain, which may in turn affect courts’ ascertainability opinions.

The bottom line is this: As was true of predominance and commonality before it, ascertainability continues to gain momentum in the federal courts. Although the pending circuit split demands resolution, for now the Supreme Court has left to the lower courts the task of fashioning ascertainability requirements that serve Rule 23’s competing goals.

Keywords: litigation, woman advocate, class action, ascertainability, Rule 23, class definition, due process, predominance, commonality


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