3rd Circuit is trying to kill consumer class actions: new en banc brief

By Alison Frankel
September 30, 2013

There’s an ideological battle under way in the federal courts of America that will determine the future viability of class actions.

The conservative wing of the U.S. Supreme Court is leading a camp that believes the rules governing class actions establish high barriers for class certification, even if those obstacles are sometimes so high that legitimate claims can’t be asserted. (The exception to this general rule is securities class actions, which the justices have so far treated with relative gentleness.)Opposing the Supreme Court are a few federal circuits – most notably, the 7th Circuit Court of Appeals, in opinions by the wise and contrarian Judge Richard Posner – that continue to believe class actions are an efficient vehicle to determine whether defendants are responsible for wronging large groups of people, no matter how small their individual damages might be. You can bet that cert petitions in October by Sears and Whirlpool in the infamous moldy washer class action litigation are going to be a flashpoint in this debate, focusing on whether alleged victims with disparate damages claims can litigate as a class. But in the meantime, a three-judge panel of the 3rd Circuit Court of Appeals has provoked a new controversy with a holding in August that classes may not be certified unless individual class members can be ascertained. According to a motion for reconsideration filed Friday, the 3rd Circuit’s “unprecedented” theory has the potential to eliminate corporate accountability to private consumers who buy their products.

The new motion asks the 3rd Circuit for en banc reconsideration of an Aug. 21 opinion in Carrera v. Bayer by Judges Anthony Scirica, Brooks Smith and Michael Chagares, who decertified a class of Florida purchasers of Bayer’s One-A-Day WeightSmart diet supplement. The consumers claimed they were deceived by Bayer’s representation that green tea extract in the supplement would boost their metabolism. U.S. District Judge Jose Linares of Newark, New Jersey, refused to approve a nationwide class asserting claims under New Jersey consumer laws, but granted the name plaintiff’s subsequent motion for certification of a class of Florida purchasers under that state’s consumer-friendly trade practices statute.

On appeal at the 3rd Circuit, Bayer’s lawyers at Bartlit Beck Herman Palenchar & Scott revived an argument that failed to sway Judge Linares: The class shouldn’t have been certified because it’s impossible to figure out who actually bought the product. Ascertainability of the class is a requirement for certification under the civil procedure rules governing class actions, Bayer said. But in a case involving a widely distributed over-the-counter product that consumers are unlikely to have a record of buying, the drugmaker said, membership cannot be ascertained so the class may not be certified.

The class, represented at the 3rd Circuit by Whatley Drake & Kallas and Carella, Byrne, Cecchi, Olstein, Brody & Agnello, countered with two methods of identifying class members, through pharmacy membership programs that track their purchases and through screening of affidavits from consumers who claim to have bought One-A-Day WeightSmart. Class lawyers also argued that because Florida’s consumer law doesn’t require a showing of individual reliance, Bayer’s potential $14 million exposure isn’t affected by the size or composition of a class defined as all Florida purchasers of One-A-Day WeightSmart. According to the class, either the company misrepresented its product and must refund all of its sales to Florida consumers or it’s off the hook. (Bayer, by the way, claims that, at most, it’s responsible for the differential value of the weight loss feature.)

The 3rd Circuit panel determined that Bayer’s due process rights would be violated unless the class could present a real plan for determining purchasers. Pointing to its recent precedent in Marcus v. BMW, the judges said defendants are entitled to know who’s in the class before it’s certified. “A defendant in a class action has a due process right to raise individual challenges and defenses to claims, and a class action cannot be certified in a way that eviscerates this right or masks individual issues,” the opinion said. “Ascertainability provides due process by requiring that a defendant be able to test the reliability of the evidence submitted to prove class membership.”

It doesn’t matter, according to the appeals court, that under Florida law, Bayer’s potential damages don’t depend on who’s a member of the class. What if some Florida purchasers later asserted that fake claimants diluted their recovery so their interests weren’t adequately represented by the name plaintiff in the class? “They could then bring a new action against Bayer and, perhaps, apply the principles of issue preclusion to prevent Bayer from re-litigating whether it is liable,” the 3rd Circuit said. “Bayer has a substantial interest in ensuring this does not happen.”

You can see why the 3rd Circuit’s ruling is so dangerous for consumer class action lawyers. They usually satisfy the ascertainability requirement for certification by defining the class in a way that sets appropriate limits on membership – not by setting forth a process of identifying individual claimants. That usually comes later, when class notices are being formulated and damages are being determined. Considering that consumers rarely save receipts or packages to prove their purchases and that there’s scant record-keeping on the purchase of low-cost, unregulated products, the 3rd Circuit decision could make consumer class actions involving these items uncertifiable. (I should note that the three-judge panel remanded the Bayer case to the trial court so the class can try again to lay out an acceptable plan to ascertain its members.)

Consumer appellate specialist Deepak Gupta of Gupta Beck came in to file the class’s motion for en banc reconsideration. The new brief is quite explicit about the potential havoc the supposedly unprecedented 3rd Circuit ruling may wreak. “In the half-century since the creation of the modern class action, the panel’s decision is the first by any federal circuit to hold that class certification may be defeated on the basis of ‘ascertainability’ even when the existence of a well-defined class is not in doubt and the full extent of potential liability is known,” the new brief said. “In reaching that result, the panel minted a new constitutional due-process right of the defendant to insist that every class member prove – under an evidentiary standard that forecloses even the traditional use of affidavits – that they purchased the defendant’s product. If allowed to stand, the panel’s decision will effectively wipe out most class actions involving small-dollar consumer products – cases for which class treatment has always been recognized as most essential.”

The brief, as you might expect, noted Posner’s recent opinion (in a moldy washer case remanded by the Supreme Court) on the efficiency of the class action vehicle to determine liability. It also cited another Posner ruling, this one addressing a class settlement of statutory ATM notice claims, on what constitutes adequate class notice. (Posner said that given the tiny damages for individual class members, it was adequate simply to post notice of the settlement in the college-town bars where the offending ATMs were located.) The class brief also pointed out the utter unlikeliness of the chain of events the 3rd Circuit posited in its consideration of Bayer’s due process rights. There have been only a handful of collateral attacks on class action judgments in the history of the vehicle, the brief said (quoting my coverage of one of the extremely rare such attacks). Should consumer class actions be gutted on the off chance that an absent class member with a claim for a few bucks might surface with allegations of inadequate representation?

Keep your eye on the docket of the Bayer appeal. I have a feeling there’s going to be a lot of amicus interest in this one.

I left phone messages with class counsel Gupta and Bayer counsel Rebecca Weinstein Bacon of Bartlit Beck but didn’t hear back.

(Reporting by Alison Frankel)

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