United States: Making Sense Of The Cascade Of Appellate Decisions On Ascertainability

Keywords: ascertainability, appellate decisions, Brecher, TCPA

We have repeatedly discussed in this space the ongoing debate among the federal courts about ascertainability—a red-hot topic in class action litigation these days. (For a more detailed look at our views on the ascertainability doctrine, see the amicus brief (pdf) that we filed on behalf of the National Association of Manufacturers in support of a pending cert petition.) That topic—and the debate among the lower courts—shows no sign of slowing down, as evidenced by new decisions issued by the Second, Sixth, and Third Circuits over the past two months. The central takeaway from these decisions is that while ascertainability is not a panacea for defendants facing consumer class actions, the doctrine (or variations on the ascertainability theme) should help defeat class actions in many circuits when class members cannot be identified without individualized inquiries.

Second Circuit Dresses Up Ascertainability In New Clothing

The Second Circuit's decision in In re Petrobras Securities might seem on the surface to have cut back on the ascertainability doctrine, but what the opinion took away with one hand it gave with the other. In Petrobras, the Second Circuit vacated the district court's certification of money-damages classes of purchasers of certain securities in "domestic transactions" for failing to apply Rule 23(b)(3)'s predominance requirement properly. But in the same opinion, the panel took the "opportunity to clarify the scope of the contested ascertainability doctrine," stating that ascertainability lacks an "administrative feasibility" component and that the "ascertainability doctrine that governs in this Circuit requires only that a class be defined using objective criteria."

As an initial matter, that statement seems hard to square with the Second Circuit's earlier published decision in Brecher v. Republic of Argentina, in which the panel was "not persuaded" by the argument "that a class defined by reference to objective criteria is all that is required to satisfy ascertainability" (quotation marks and alterations omitted). Instead, the Brecher court held that "[a] class is ascertainable when defined by objective criteria that are administratively feasible and when identifying its members would not require a mini-hearing on the merits of each case" (emphasis added). A subsequent unpublished opinion by the Second Circuit, Leyse v. Lifetime Entertainment Services, LLC, took that language at face value in affirming a denial of class certification for lack of ascertainability where the plaintiff "had failed to show a sufficiently reliable method for identifying the proposed class to avoid 'mini-hearing[s] on the merits of each case.'"

Yet the Petrobras panel concluded that Brecher's language about administrative feasibility and individualized mini-hearings merely "conveyed the purpose underlying the operative requirements of definiteness and objectivity" in the class definition, rather than articulating independent components of the ascertainability requirement. (Emphasis the Court's.) According to the Petrobras panel: "Our decision in Brecher did not create an administrative feasibility requirement, and we decline to adopt one now."

Notably, there was no overlap among the judges on the Brecher and Petrobras panels. To the extent that the debate between the panels matters, en banc review in an appropriate case might make sense for the Second Circuit to clear up this newfound confusion in its precedents—unless the Supreme Court steps in first.

That said, the best understanding of Petrobras is that it found a different home for an administrative feasibility requirement. As the panel explained, difficulties in feasibly identifying class members may still lead to "fatal challenges" to class certification—but those challenges would take place under Rule 23(b)(3)'s predominance requirement instead. As the panel put it, "classes that require highly individualized determinations of member eligibility" risk running afoul of "the predominance requirement." For that reason, the panel vacated the class certification order on predominance grounds, reasoning that identifying who purchased the challenged securities in "domestic transactions" may require "transaction-specific facts . . . not obviously susceptible to class-wide proof." The panel held that the district did not adequately consider "the potential for variation across putative class members—who sold them the relevant securities, how those transactions were effectuated, and what forms of documentation might be offered in support of domesticity." As the panel summarized, "[t]he predominance analysis must account for such individual questions, particularly when they go to the viability of each class member's claims."

Finally, the panel also rejected the district court's belief that it was appropriate to sort out the domesticity of transactions post-certification, using "'bureaucratic processes of determining who belongs to a Class'"—presumably meaning post-verdict claims processing by third-party claims administrators. The panel explained that such processes "do[] not obviate the need to consider the plaintiff-specific nature" of the inquiry into a transaction's domesticity at the class certification stage, and further emphasized that "the possibility of post-certification procedural tailoring does not attenuate [district courts'] obligation to take a 'close look' at predominance when assessing the motion for certification itself."

Readers might be forgiven for thinking that this approach to predominance sounds a lot like the strong form of ascertainability ...

Sixth Circuit recognizes "class member identity concerns" as a basis for rejecting certification

The Sixth Circuit upheld the rejection of class certification in a TCPA case because identifying class members was not administratively feasible. Specifically, in a published opinion in Sandusky Wellness Center, LLC v. ASD Specialty Healthcare, Inc. (pdf), the Sixth Circuit agreed with the district court that a "junk fax" class action under the TCPA could not be certified because there were no fax logs that could be used to feasibly identify potential class members. As the district court had held, (1) the individualized inquiries necessary to demonstrate receipt of an offending fax meant that plaintiffs could not satisfy Rule 23(b)(3) predominance; and (2) in the alternative, the proposed class was not ascertainable "since identifying class members in the absence of fax logs was not 'administratively feasible.'"

The Sixth Circuit upheld the denial of certification based on the district court's "recognition of the difficulty in identifying class members without fax logs and with sole reliance on individual affidavits . . ., regardless of whether this concern is properly articulated as part of ascertainability, Rule 23(b)(3) predominance, or Rule 23(b)(3) superiority." The panel saw "no need to add [its] own opinion to th[e] debate" over how best to "categorize[] class member identity concerns": it was enough to say that district courts have discretion to deny class certification on the basis of such concerns.

Significantly, the panel rejected the plaintiffs' argument that the use of affidavits by would-be class members attesting to receipt of an offending fax automatically provides a feasible way to prove membership in the class, deferring to the district court's determination that the proposed affidavits would not provide a manageable way to identify class members. In our view such affidavits are never adequate on their own to avoid ascertainability problems—because due process entitles defendants to challenge an individual's claim of membership in the class. Although the Sixth Circuit did not announce such a categorical rule—probably because it was unnecessary to do so in the case before it—its opinion gives defendants within the Sixth Circuit powerful arguments to challenge the use of such affidavits at the class certification stage.

Third Circuit reaffirms administrative feasibility requirement while overturning specific denial of class certification

Finally, and most recently, the Third Circuit vacated the district court's denial of class certification in another TCPA "junk fax" case, City Select Auto Sales Inc. v. BMW Bank of North America Inc. (pdf). City Select involved faxes sent to car dealerships that advertised financing of BMW purchases. The defendants had a customer database of auto dealerships from which the allegedly offending faxes were generated, and the class definition was limited to dealerships included in that database. The existence of the database was established in the district court proceedings, but the database itself was not produced and made part of the record because the plaintiff agreed early in the case not to seek its production (and the plaintiff therefore lost a later motion to compel production before the magistrate judge at the class certification stage). The district court denied class certification solely on ascertainability grounds, concluding that even if the customer database would allow plaintiff "to identify the total universe of fax recipients, there is no objective way of determining which customers were actually sent the BMW fax."

The Third Circuit vacated and remanded for the district court to re-evaluate ascertainability after production of the database and affording plaintiff a renewed opportunity to propose a method for ascertaining class members on a more complete record. The court made clear that its holding did not alter the Third Circuit's two-part standard for ascertainability—over a concurrence by Judge Fuentes, who urged the court to join the Ninth Circuit and others in rejecting an administrative feasibility requirement. Thus, in the Third Circuit, a plaintiff must still show that "(1) the class is defined with reference to objective criteria; and (2) there is a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition" (quotation marks omitted).

The City Select court reiterated that potential class members may not use affidavits, standing alone, to prove membership in the class, because there is no reliable and administratively feasible way of verifying the contents of the affidavits, short of a mini-trial on each claimant's assertion of membership. But in this case, there was the possibility that "affidavits in combination with the Creditsmarts database" could satisfy ascertainability. In particular, the court noted that the record contained "significant circumstantial evidence that the faxes were sent to every customer in the database at that time."

Accordingly, it was possible that little individualized fact-finding would be required to verify a claimant's attestation that it received the offending fax, and the Third Circuit remanded for the district court to evaluate the issue on a more complete record. As the Third Circuit summarized, "[t]he amount of over-inclusiveness, if any, of the proposed records is a critical consideration."

Some observers thought that City Select represented a retreat from the Third Circuit's "strong form" of ascertainability, exemplified by Carrera v. Bayer Corp. But there's a simpler explanation for the City Select decision: Facts matter. Here, the critical facts were that there was a database of potential recipients and (potentially) corroborating evidence that everyone in the database received the fax. If plaintiff is right about those facts, then there is nothing surprising about City Select.

One thing is certain: The courts of appeal and district courts will continue to debate whether there must be an administratively feasible way to identify actual class members before a class may be certified—whether described in terms of ascertainability, predominance, or something else. In addition, there is a possibility that the Supreme Court steps in—something we may learn in a matter of days. Stay tuned!

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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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