United States: What In-House Counsel Need To Know About Challenging Ascertainability In Class Actions

Perhaps more than any other legal issues a company may face, class action cases are the greatest cause for concern of company counsel. That concern is well-founded. Defense costs are staggering, the settlement values significant, and the very future of the company could be at stake.

Defense strategies opposing class certification have long focused on the explicit requirements of Fed. R. Civ. P. 23, but courts with increasing frequency are denying class certification for plaintiffs' failure to prove that the proposed class is ascertainable. Defendants prevailing at the class certification stage can cripple a plaintiff's case and save a company millions in fees and settlement costs. An early evaluation of the potential effectiveness of an ascertainability argument is an absolute must for any attorney faced with a putative class action.

Ascertainability requires that a proposed class be readily identifiable by reference to objective, and not subjective, criteria. Objective classes are ones where it is easy for a court to determine who is a member—because the defendant kept records of all purchasers, for instance. A subjectively defined class, on the other hand, is one where membership can only be identified by class members' self-identification—a "raising of their hands" to count them among the class members. The former passes muster for courts applying this type of analysis; the latter does not.

The United States Court of Appeals for the 3rd Circuit has taken the lead with respect to outlining the contours of ascertainability challenges to class certification, such as in Carrera v. Bayer Corp.(holding consumer class not ascertainable because retailer records could not reliably identify individual purchasers and unreliable affidavits would dilute true class members' recovery); Hayes v. Wal-Mart Stores, Inc. (instructing on remand that "[t]his petition for class certification will founder if the only proof of class membership is the say-so of putative class members or if ascertaining the class requires extensive and individualized fact-finding"); and Marcus v. BMW of N. Am., LLC (cautioning against approving class identification method based only on alleged members' "say so"). Other circuits and district courts around the country have followed suit, giving class action defendants a new and potent weapon to either defeat class actions outright at the certification stage or force a favorable settlement.

Recently, the 3rd Circuit offered even more insight into the nuances of an ascertainability challenge, offering attorneys a guide to hone an even more targeted attack in this type of case. In Byrd v. Aaron's Inc., the court affirmed the continuing viability of the ascertainability requirement and clarified that it is a separate and distinct requirement from the other prerequisites of Fed. R. Civ. P 23. The court also explained that in order to challenge ascertainability, defendants must be precise: "If defendants intend to challenge ascertainability, they must be exacting in their analysis and not infuse the ascertainability inquiry with other class-certification requirements." While plaintiffs need not actually identify all class members at the certification stage, merely providing assurances to the court that the class members can be identified is insufficient. Instead, would be class plaintiffs must put forth evidence that the methods proposed to identify class members would be successful.

This required evidentiary support will often come in the form of affidavit testimony from class action administration firms holding themselves out as experts in the management of class actions and identification of potential class members. In these circumstances, class action defendants must consider challenging the methodology and conclusions of such "experts" at the certification stage under the familiar principles laid out by the Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc. The 3rd Circuit, in In re Blood Reagents Antitrust Litig., recently joined a number of other circuits in concluding that expert testimony proffered at the class certification stage must be scrutinized for reliability under the Daubert standard. A focused attack on the credentials, experience and methodology employed by plaintiffs' experts at the class certification stage offers another way to deliver a potential knockout punch to plaintiffs in a proposed class action.

A successful ascertainability challenge could significantly reduce—if not eliminate altogether—substantial liability for companies faced with class action lawsuits. Here are five things you need to know about mounting such a challenge:

  1. Ascertainability challenges are particularly effective when the goods or products at issue are low-value items where the defendant (or other retailers) do not keep records of individual purchasers.
  2. Find out what records your client has that might identify potential class members. The easiest classes to ascertain are the ones where the defendant has the records that can identify the class members. If those records do not exist, plaintiffs will have a more difficult time meeting the ascertainability requirement.
  3. Send out early discovery requests to find out how plaintiffs intend to identify class members, and identify what, if any, experts they expect to enlist in order to help find potential class members.
  4. If it is clear that plaintiffs have a potentially fatal ascertainability problem, consider a preemptive motion to deny class certification that puts the ascertainability deficiencies squarely before the court.
  5. Launch a Daubert challenge to highlight the inexperience of class action administrators or the lack of any sound methodology for identifying potential class members.

Reprinted with permission from the June 10, 2015, issue of Inside Counsel. (c) 2015 Inside Counsel. Further duplication without permission is prohibited. All rights reserved.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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George J. Krueger
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