Ascertainability sinks consumers’ antitrust case v. alleged egg cartel

September 21, 2015

(Reuters) – Nearly 90 percent of American households, according to an Internet survey, buy plain old eggs. Not the fancy organic, free-range or Omega-3 eggs but the ordinary sort known in the industry as commodity shell eggs. And according to plaintiffs’ lawyers in a long-running antitrust class action in Philadelphia federal court, those egg-purchasing consumers were all victims of a conspiracy among egg producers to inflate the price of their product by restraining production. (Among the conspiracy’s alleged tactics was the untimely slaughter of flocks of egg-laying hens.)

Unlike the hens, consumers weren’t badly injured, at least not individually. So the odds are distinctly against the possibility that someone in the small minority of American consumers that didn’t buy commodity shell eggs would go to the trouble of filing a false affidavit claiming to be due a few bucks in damages. As U.S. District Judge Gene Pratter of Philadelphia wrote Friday, “The court retains enough faith in the citizenry and human nature in general to assume that most people do not risk perjury for the sake of a few dollars in a class recovery.”

But in the 3rd Circuit, where Judge Pratter’s court is located, judges can’t certify classes based on their faith in human nature or even on the overwhelming odds that plaintiffs who assert claims are actually legitimate members of the class.

In Pennsylvania, New Jersey and Delaware, trial judges may only certify class actions if class membership can be determined by an objective, administratively feasible mechanism. Sworn affidavits, according to the 3rd U.S. Circuit Court of Appeals, are not a good enough way to ascertain class membership.

Under her circuit’s strictures, Judge Pratter denied class certification. “There are no objective records to identify class members, and the methods proposed to weed out unreliable affidavits are insufficient because they do not allow for defendants to challenge the core feature of class membership – purchase of a commodity shell egg,” she said. Even assuming the reliability of the Internet survey indicating nearly 9 in 10 households bought the eggs – an assumption the defendants refuted – there are 15 million potential false claimants, Judge Pratter wrote.

Perhaps she could have certified a class, she said, if plaintiffs had given her some additional demographic information about the sliver of the population that does not buy commodity shell eggs. But they did not, according to the judge. Nor did their suggestion of random audits of plaintiffs’ affidavits or requiring recent proof of egg purchases (even though the class period is 1999-2006) solve the problem.

Even as she found the proposed class to fall short of the 3rd Circuit’s ascertainability standard, though, Judge Pratter acknowledged the “quandary” for plaintiffs in small-dollar cases. Most people don’t save years-old receipts showing they bought eggs or other inexpensive items, leading to what Pratter called a “disharmony” between the 3rd Circuit’s ascertainability requirement and the goal of federal rules permitting plaintiffs with small claims to band together to sue as a class.

The judge cited a July ruling from the 7th Circuit that flat-out rejected the 3rd Circuit’s ascertainability framework. In that case, Mullins v. Direct Digital, the 7th Circuit pointed out that a sworn affidavits from a lone witness is considered legally sufficient in every kind of case except prosecution for treason. Judge Pratter questioned “why affidavits, which are by definition sworn under oath, are, for purposes of ascertainability, essentially considered incompetent evidence.” She said she was “at a loss to explain why this might be.” (Pratter did not mention, though she perhaps should have, a January 2015 ruling by the 1st Circuit in the antitrust case In re Nexium, in which that appeals court said affidavits from plaintiffs avowing their purchase of the drug would be proof enough of their membership in the class.)

If the tens of millions of consumers who bought allegedly overpriced eggs were litigating in the 1st or 7th Circuits, their class certification would not have foundered on ascertainability. In the 3rd Circuit, their class action was as doomed as Humpty Dumpty.

Krishna Narine of Meredith & Narine, who is co-lead counsel for the indirect purchaser plaintiffs, declined to comment. The defendants are represented by, among other firms, Weil Gotshal & Manges, Stinson Leonard Street, Porter Wright Morris & Arthur and Dechert.

For more of my posts, please go to WestlawNext Practitioner Insights

Follow me on Twitter

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/