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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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