United States: Third Circuit Rejects Effort At End Run Around The Ascertainability Requirement

We previously wrote about the Third Circuit's decision in Carrera v. Bayer Corp., which reversed a district court's class-certification order because there was no reliable way to ascertain class membership—indeed, no way to identify who was a member of the class aside from a class member's own say-so. Last week, the full Third Circuit denied (pdf) the plaintiff's request to rehear the case en banc over the dissent of four judges. The clear message of Carrera is that when plaintiffs file class actions that have no hope of compensating class members for alleged wrongs because the class members can't be found, courts should refuse to let these actions proceed.

As we discuss below, the denial of rehearing is significant in itself, given the concerted efforts by Carrera and his amici to draw attention to the case. But what might be most significant about this latest set of opinions is what even the dissenting judges did not say.

First, here's some brief background about the case. Carrera filed a class action against Bayer alleging that the company overstated the health benefits of its One-A-Day WeightSmart multivitamin. He sought to represent a putative class of all consumers who ever purchased WeightSmart in Florida. The district court granted class certification, but the Third Circuit granted Bayer's petition for review under Rule 23(f) and reversed.

The problem for Carrera, the Third Circuit explained, is that there is no reliable way to ascertain who the class members are. WeightSmart was sold at CVS and other retail stores throughout the state, rather than purchased directly from Bayer, so the company did not—and could not—have a "master list" of customers who bought the product. There's no indication that the retailers kept records of which customers purchased WeightSmart, and even if some purchasers might be identified through loyalty cards or online purchases, that list would be grossly incomplete. Few if any customers are likely to have saved receipts or proofs of purchase documenting each of their vitamin purchases. And Bayer stopped selling WeightSmart in Florida in January 2007, but the class was not certified until November 2011, so it is especially unlikely that reliable records exist for purchases made many years ago.

Because there was no reliable way to determine the identities of putative class members, the Third Circuit held that class certification was improper. Although ascertainability is not among the explicit requirements listed in Rule 23(a), courts have uniformly recognized that ascertainability is an implicit requirement for certifying a class. See, e.g., Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 592-94 (3d Cir. 2012); Oshana v. Coca-Cola Co., 472 F.3d 506, 513-14 (7th Cir. 2006); Miles v. Merrill Lynch & Co. (In re Initial Pub. Offering Sec. Litig.), 471 F.3d 24, 30, 44-45 (2d Cir. 2006); DeBremaecker v. Short, 433 F.2d 733, 734 (5th Cir. 1970).

Recognizing this difficulty, Carrera's petition for rehearing en banc (pdf) essentially challenged the premise that ascertainability should be taken seriously. In Carrera's view, it's apparently not necessary for a plaintiff bringing a consumer class action to be able to identify who the class members actually are. Instead, Carrera proposed that the defendant's aggregate liability could be measured based on total sales or revenues (without knowing whom the product was sold to); any class members capable of proving their purchases would be allowed to submit a claim and receive payment; and then the remaining amount—belonging to class members who could not be identified—would escheat to a state unclaimed-property fund (minus a cut for the lawyers). Under this approach, Carrera argued, the absence of any reliable way to identify class members has no bearing on Bayer, because its total liability would be the same no matter how the damages are ultimately distributed. And as for the fact that few class members would be compensated directly by a judgment or settlement in the case, Carrera viewed this to be of no moment at all.

Four judges dissented from the full court's decision to deny the petition, but for a very different reason. According to the dissent, the ascertainability requirement could be satisfied in this case because some class members "could be determined by records from loyalty card programs and online purchasing receipts" and "the remaining may be found through affidavits" averring (without actual proof) that the signer purchased the product. But the en banc court was correct to dismiss that argument and deny rehearing. Rule 23 requires that a plaintiff seeking class certification "affirmatively demonstrate his compliance with the Rule" and that courts conduct a "rigorous analysis" before finding the requirements satisfied. See, e.g., Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011). Carrera did not demonstrate that any retailer records capable of identifying class members even exist, much less that they are sufficiently comprehensive to ascertain class membership. And allowing putative class members to assert eligibility through conclusory affidavits, rather than through actual evidence, cannot satisfy the ascertainability requirement, much less comply with due process, because there would be no meaningful way to verify whether each claim is truthful and accurate or for the defendant to challenge those that are not.

What is most significant about the denial of rehearing, however, is that none of the judges accepted Carrera's argument that it's unnecessary to  show that the vast majority of class members can be identified for class certification. This rejection of Carrera's approach puts the Third Circuit in good company: Numerous courts have held the inability to prove individual damages cannot be overcome (at least in a litigated class action, as opposed to a settlement) by calculating damages an aggregate basis—an approach sometimes referred to as "fluid recovery"—and proposing a cy pres distribution of unclaimed funds. See, e.g., McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 232 (2d Cir. 2008); Windham v. Am. Brands, Inc., 565 F.2d 59, 72 (4th Cir. 1977); In re Hotel Tel. Charges, 500 F.2d 86, 91 (9th Cir. 1974).

Had Carrera's approach been accepted, it would have marked a radical change in how Rule 23 is supposed to work. At bottom, Rule 23 is simply an aggregation device that allows similarly situated plaintiffs to obtain redress through a single lawsuit, rather than requiring each individual to bring a separate suit. A Rule 23 class action is the sum of the individual claims within it—nothing more. If class members can't prove the elements of their individual claims, then they can't use the class-action device to skirt those requirements. To do so would violate the Rules Enabling Act, which forbids interpreting Rule 23 to abridge, enlarge, or modify any substantive right. See Wal-Mart, 131 S. Ct. at 2561; Klier v. Elf Atochem N. Am., Inc., 658 F.3d 468, 474 (5th Cir. 2011).

Underlying Carrera's argument—and necessarily rejected by the Third Circuit—is an approach that sees plaintiffs' lawyers not as attorneys seeking redress for their clients, but instead as free-roaming attorneys general with self-appointed power to prosecute purported violations of the law. Requiring proof of damages for each class member, Carrera argues, might not fully punish or deter alleged misconduct. But private lawyers are empowered to bring claims and seek redress only to their extent that their clients can prove a right to relief. If Carrera were right that all that matters is aggregate damages and deterrence, there would be no need for named plaintiffs at all.

Of course, as a practical matter, in many of today's class actions the plaintiffs' lawyers are running the show and recruiting clients, not the other way around. But as far as the law is concerned, lawyers still can't recover damages without identifying the individuals entitled to that relief. Nothing in Rule 23 allows class actions to take on a life of their own and demand damages not owed to any particular class member. The Third Circuit was right to reject Carrera's "demand damages first, identify plaintiffs later (or never at all)" approach. Other courts should do the same—as indeed many already have.

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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