7th Circuit roundly rejects 3rd Circuit ‘ascertainability’ framework

July 29, 2015

Class action lawyers may want to get up a petition to declare July 28 “Judge David Hamilton Day” because they could not have asked for a stronger defense of class actions – and the existing federal rules governing class certification – than they received Tuesday in Hamilton’s opinion for a three-judge panel of the 7th U.S. Circuit Court of Appeals in Mullins v. Direct Digital. The 7th Circuit scrutinized the 3rd Circuit’s controversial requirement of a “reliable and administratively feasible” way to ascertain class membership – and wholly rejected it. According to Judge Hamilton and his panel colleagues, Judges William Bauer and Michael Kanne, the 3rd Circuit’s 2013 ruling in Carrera v. Bayer upset the federal rules’ carefully wrought framework for class certification.

“The heightened ascertainability requirement,” the opinion said, “gives one factor in the balance absolute priority, with the effect of barring class actions where class treatment is often most needed: in cases involving relatively low-cost goods or services, where consumers are unlikely to have documentary proof of purchase.”

The 7th Circuit’s precedent, Judge Hamilton wrote, already requires trial courts to deny certification to proposed classes that are too vaguely defined, rely on subjective criteria such as someone’s state of mind, or contain “fail safe” provisions that depend on the defendant’s liability. And according to the 7th Circuit, that’s enough.

The court considered four policy justifications for a heightened ascertainability requirement: administrative convenience, unfairness to absent class members, unfairness to bona fide class members, and due process for defendants. According to the 7th Circuit, the procedural rules for class actions – which don’t specifically address ascertainability – already take care of those concerns.

Moreover, the 7th Circuit said (quite sensibly), it doesn’t make any sense to refuse to certify classes to protect absent and bona fide class members under the theory that they may not get the recovery they’re entitled to unless plaintiffs can show a way to weed out unqualified class members. Without certification, Judge Hamilton wrote, those class members will receive nothing.

“In general, we think imposing this stringent version of ascertainability does not further any interest  that is not already adequately protected by the (federal) rule’s explicit requirements,” the opinion said. “On the other side of the balance, the costs of imposing the requirement are substantial.”

Importantly, the 7th Circuit explicitly said affidavits from class members are an acceptable way to ascertain who is in a class – a methodology the 3rd Circuit specifically ruled out in its Carrera decision. Judge Hamilton said that as long as defendants have an opportunity to challenge “self-serving affidavits from plaintiffs,” ascertaining class membership through plaintiffs’ testimony doesn’t impinge on defendants’ rights. After all, he said, “we are aware of only one type of case in American law where the testimony of one witness is legally insufficient to prove a fact” – and that’s prosecution for treason. “There is no good reason to extend that rule to consumer class actions,” Hamilton wrote.

The 7th Circuit said it agreed to consider Digital Direct’s interlocutory appeal because it wanted to address what it called “the recent expansion of ‘ascertainability.'” (The case involves allegedly deceptive labeling of a joint relief supplement called Instaflex.) The opinion meticulously traced that expansion, which began with a 2012 decision from the 3rd Circuit in a case against BMW and peaked in the 2013 Carrera decision, which a sharply divided 3rd Circuit declined to rehear en banc. That appellate court, as I’ve reported and the 7th Circuit has noted, seems to be easing up a bit on ascertainability, as evidenced by its 2015 opinion in Byrd v. Aaron’s. But in the meantime, a slew of trial judges across the country, not only in the 3rd Circuit, have refused to certify classes that could only be ascertained by plaintiffs’ affidavits.

The 7th Circuit is the first appellate court to dissect the 3rd Circuit’s ascertainability framework, which was previously cited with approval but not really analyzed in an unpublished 11th Circuit decision last month. So this opinion is hugely important, said Stewart Weltman of Boodell & Domanskis, who argued at the 7th Circuit for the plaintiffs suing Direct Digital. “This is one of the most thorough and intellectually honest opinions I’ve encountered,” Weltman said. “One hopes that from the strength of this decision and its logic, the 3rd Circuit will realize it went off the tracks.”

Whenever one federal circuit decides another is flat-out wrong, you wonder if the U.S. Supreme Court will eventually have to resolve the split. I called and emailed Ari Rothman of Venable, who argued for Digital Direct at the 7th Circuit, to ask whether his client will seek Supreme Court review, but didn’t hear back.

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