A recent federal case in Texas illustrates the importance of discovery in a class certification motion—and how a defendant can exploit the failure to obtain discovery on even the most fundamental class allegations.
In Pfeffer v. HSA Retail, Inc., a Western District of Texas judge denied a motion to certify a class of ATM users who were charged a transaction fee despite the absence of a physical notice of the fee on the ATM. The complaint alleged that the bank's failure to post a physical notice on an ATM constituted a violation of the Electronic Funds Transfer Act (EFTA).
The court denied the motion, holding that the plaintiff had not satisfied Rule 23's numerosity requirement and had not provided a sufficiently definite time period for the class definition. In arguing that the numerosity requirement was met, the plaintiff made the bald allegation that joinder would be impracticable and offered to provide evidence of the class size following written discovery, which the plaintiff said he was serving contemporaneously with the class certification motion, "by way of a Reply Brief and supporting materials or otherwise." The plaintiff, however, never provided such evidence. The plaintiff's reply brief did not even mention the numerosity requirement. Given the failure of the plaintiff to provide even an estimate of the class size, the court found that there was insufficient evidence to comply with the numerosity requirement.
As for the time period in the class definition, the plaintiff sought to include in the class all non-customers who withdrew funds "between October 31, 2011 through the date on which Defendant came into compliance with the ATM Fee posting requirements of the EFTA. . . ." The court held that without an exact date to cut off class membership, it had no way to properly identify which users should be included in the class and which users should be excluded from the class: "Without an exact date on which to cut off class membership, the Court has no way of properly identifying those customers who should be included in the class and those who should be excluded."
Furthermore, the court noted that even if the plaintiff successfully established numerosity and a sufficiently definite time period, the court would still be concerned with the administrative feasibility of identifying individual class members. The EFTA applies only to accounts established primarily for personal, family, or household purposes. Therefore, to administer the class the court would need a practical method for discerning the nature of each user's account based on the information available to it. Without such an approach the court had serious concerns regarding certifying the class.
It appears from the opinion that class counsel did not complete class discovery prior to the court's ruling. Discovery should have easily provided class counsel information about the size of the class and the date when the bank brought its ATM into compliance with the EFTA. Instead, class counsel apparently assumed it would be enough that these facts were readily ascertainable, even though they had not actually been ascertained. Although it may seem obvious to a plaintiff that the numerosity requirement will be satisfied or that the class definition can later be limited to an exact time period, a defendant is entitled to demand that such allegations be proven prior to class certification.
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