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Class Certification: Defining or Challenging Class Membership Evaluating Ascertainability, Overbreadth and Fail-Safe Class Issues

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WEDNESDAY, SEPTEMBER 18, 2013

Presenting a live 90-minute webinar with interactive Q&A

Andrew J. Trask, Counsel, McGuire Woods, London, England

Hunter J. Shkolnik, Senior Partner, Napoli Bern Ripka Shkolnik, New York

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Ascertainability Part I: Overbreadth & Administrative Feasibility

Andrew Trask McGuire Woods

11 Pilgrim Street London EC4V 6RN

United Kingdom atrask@mcguirewoods.com

Rule 23(c)(1)(B)

Court must define Class Claims Defenses

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“Essential prerequisite of a class action.” “Many courts and

commentators have recognized that an essential prerequisite of a class action, at least with respect to actions under Rule 23(b)(3), is that the class must be currently and readily ascertainable based on objective criteria.”

Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 592-93 (3d Cir. 2012) (emphasis added).

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Overbroad “All individuals who purchased

for consumption and not resale fountain Diet Coke in ... Illinois from March 12, 1999, through the date of entry of an order certifying the class”

“Membership in Oshana's proposed class required only the purchase of a fountain Diet Coke from March 12, 1999, forward. Such a class could include millions who were not deceived and thus have no grievance under the ICFA.” (emphasis added)

Oshana v. Coca-Cola Co., 472 F.3d

506, 510 (7th Cir. 2006).

8

Focus on the harm suffered FDCPA class: “All New Jersey

consumers who, between October 7, 2010 and August 23, 2011, Asset Acceptance, LLC called using the telephone number 443-550-7962. ”

Definition was “overbroad even if limited to members with caller ID services because the content of the caller ID depends upon who the member's carrier was; it is unproven that any carrier other than Comcast (who served Plaintiff) had this problem of failing to update its database from Omega's corrected SS7 database.”

Bright v. Asset Acceptance, LLC, No.

11-5846, 2013 U.S. Dist. LEXIS 108432, *20 (D.N.J. Aug. 1, 2013) (emphasis added).

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“Administrative feasibility” "Administrative feasibility

means that identifying class members is a manageable process that does not require much, if any, individual factual inquiry.” (quoting Newberg)

Carrera v. Bayer Corp., No. 12-2621, 2013 U.S. App. LEXIS 17479, *13 (3d Cir. Aug. 21, 2013).

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Individualized issues can make it impossible to define class Alleges run-flat tires went

flat, needed replacement more often.

Problems: Couldn’t ID all owners/lessees who

originally bought in NJ.

Couldn’t ID all BMWs with run-flat tires.

Couldn’t ID after-market additions.

Couldn’t ID non-warranty replacements.

Marcus v. BMW of N. Am., 2012 U.S. App. LEXIS 16369, *19-20 (3d Cir. Aug. 7, 2012).

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Class members’ say-so is not enough “We caution, however,

against approving a method that would amount to no more than ascertaining by potential class members' say so.”

Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 594(3d Cir. 2012).

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So “feelings” and “beliefs” are out Tobacco class action.

Defined class by subjective estimation of cigarette use.

“If a class definition includes a requirement that cannot be proven directly, and that depends instead upon each putative class member's feelings and beliefs, then there is no reliable way to ascertain class membership.”

Xavier v. Philip Morris USA Inc., 787 F. Supp. 2d 1075, 1089 (N.D. Cal. 2011).

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Membership should not require evidence from claimants Insurance class: “All persons who, while

residing in the State of Washington, and in connection with a mortgage financing transaction where the loan amount did not exceed $1,000,000: (a) paid a premium on or after November 28, 2003 for the purchase of residential title insurance from First American . . . ; (b) had a lender's title insurance policy that insured the lien of a deed of trust on the same property that had been issued at the scheduled rate; and (c) did not receive the reorganization rate specified in the applicable First American rate manual.”

“There is little point, however, in allowing the Bouchers to give class members notice if they cannot prove their claims without a cumbersome individualized review of evidence pertaining to each class member's title insurance purchase.”

Boucher v. First Am. Title Ins. Co., No. C10-199RAJ, 2012 U.S. Dist. LEXIS 102904 (W.D. Wash. Jul. 24, 2012).

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Membership should not require evidence from claimants Three overlapping subclasses,

involving pension benefits.

“Therefore, class membership is necessarily based on an employee's eligibility for retirement benefits and for delta benefits, which, as the Magistrate Judge found, requires individualized proof of entry into the class.”

Alasin v. Westinghouse Savannah River Co., No. 1:05-1045-HFF-BM, 2008 WL 2169427 (D.S.C. May 23, 2008) (emphasis added).

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Difficult if defendant lacks records “The evidence put forth by

Carrera is insufficient to show that retailer records in this case can be used to identify class members. Depending on the facts of a case, retailer records may be a perfectly acceptable method of proving class membership. But there is no evidence that a single purchaser of WeightSmart could be identified using records of customer membership cards or records of online sales.”

Carrera v. Bayer Corp., No. 12-

2621, 2013 U.S. App. LEXIS 17479, *16 (3d Cir. Aug. 21, 2013).

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But unavoidable if we respect due process. “A defendant has a similar,

if not the same, due process right to challenge the proof used to demonstrate class membership as it does to challenge the elements of a plaintiff's claim.”

Carrera v. Bayer Corp., No. 12-2621, 2013 U.S. App. LEXIS 17479, *12 (3d Cir. Aug. 21, 2013).

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Exceptions - SD Cal OK with no-record classes Defendant argued it did not

have records of class members.

“However, there is no requirement that the identity of the class members be known at the time of certification. If class actions could be defeated because membership was difficult to ascertain at the class certification stage, there would be no such thing as a consumer class action.”

Astiana v. Kashi Co., No. 3:11-CV-01967-H, 2013 U.S. Dist. LEXIS 108445, *11 (S.D. Cal. Jul. 30, 2013) (internal citations & quotations omitted).

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These are really predominance problems “[P]ut in Rule 23(b)(3)

terms, if the success or failure of every class member's claim depends on individualized proof, the Bouchers cannot demonstrate that "common questions of law or fact predominate over any questions affecting only individual members."

Boucher v. First Am. Title Ins. Co., No. C10-199RAJ, 2012 U.S. Dist. LEXIS 102904, *11 (W.D. Wash. Jul. 24, 2012) (emphasis added).

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Also a superiority issue "A serious, and perhaps

insurmountable, manageability problem arises if each member has to litigate separate issues to establish his or her right to recover individually.”

Rowden v. Pacific Parking Sys., 2012 U.S. Dist. LEXIS 95296, *10 (C.D. Cal. Jul. 2, 2012) (emphasis added).

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May not be as great a problem for Rule 23(b)(2) class “[B]ecause notice is not

obligatory and because the relief sought is injunctive rather than compensatory, it is not clear that the implied requirement of definiteness should apply to Rule 23(b)(2) class actions at all.”

Rule 23(b)(2) ” designed to cover 'actions in the civil-rights field where a party is charged with discriminating unlawfully against a class, usually one whose members are incapable of specific enumeration.'”

Floyd v. City of New York, 2012 U.S. Dist. LEXIS 68676, *12 (S.D.N.Y. May 16, 2012) (internal citations omitted, emphasis in original).

21

But Rule 23(b)(2) is not license to ignore ascertainability “a class may be certified under Rule

23(b)(2) only if ‘the party opposing the class has acted or refused to act on grounds that apply generally to the class’. The ‘general application’ of practices to be specified later—and that when specified may turn out to affect only subsets of the class, which may or may not include any named representative—is hard to evaluate.”

Rahman v. Chertoff, 530 F.3d 622, 627 (7th Cir. 2008) (Easterbrook, J.).

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Class Certification: Defining or Challenging Class Membership

Evaluating Ascertainability, Overbreadth and Fail-Safe Class

Issues

September 19, 2013

Webinar

HUNTER J. SHKOLNIK PRIYA GANDHI 212-267-3700 hunter@napolibern.com

Issues with Fail-Safe Classes • Pleading challenges for Plaintiffs

• Complaint must be: – Plausible on its face – Contain more than just speculative factual allegations – Contain more than just conclusions – Different state laws: Should define separate classes

• Strong defense for defendants

• Flawed class definition can be fatal

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What is a Fail-Safe Class?

• Class defined in terms of the defendant’s liability

• Requires a decision on the merits of a claim in order to determine who is within the class itself

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What is a Fail-Safe Class?

• Difference between: “all individuals who received unsolicited text messages from the defendant from January 1, 2012 through December 1, 2012 in violation of the Telephone Consumer Protection Act” vs. “all individuals who received unsolicited text messages from the defendant from January 1, 2012 through December 1, 2012”

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What is a Fail-Safe Class? “all individuals who received unsolicited text messages from the defendant from January 1, 2012 through December 1, 2012 in violation of the Telephone Consumer Protection Act” -Fail-safe because the class requires there to be a determination regarding a violation of the Telephone Consumer Protection Act prior to the ascertainment of the class

27

Fifth Circuit: Rodriguez, et al. v. Countrywide Insurance: Facts

• Plaintiffs, after coming out of Chapter 13

bankruptcies, were charged fees by Countrywide

• Countrywide threatened to foreclose on the

plaintiffs’ homes if they refused to pay these fees

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Fifth Circuit: Rodriguez, et al. v. Countrywide Insurance: Holding

• Bankruptcy Court granted class certification

• Countrywide attempted to overturn the

certification on the basis that its conduct imposing fees was not generally applicable to the class – Company had no policy regarding assessment of fees

during bankruptcy

• Fail-safe classes preclude the possibility of an adverse judgment against class members

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Fifth Circuit: Rodriguez, et al. v. Countrywide Insurance: Reasoning

• Court found that Countrywide did have a

generally applicable practice

• Fifth Circuit affirmed the Bankruptcy Court’s certification stating:

– Certification was appropriate under Rule 23(b)(2) because “Countrywide charged every class member…unauthorized fees”

– This behavior was common towards all members of class

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Fifth Circuit: Forbush v. J.C. Penney Co.

• If the proposed class is linked by a common

complaint, “the possibility that some may fail to prevail on their individual claims will not defeat class membership.”

• Defendant’s argument regarding specificity of

class definition was just a commonality argument 31

Fifth Circuit: Mullen v. Treasure Chest Casino

• Defendant argued that class was not

ascertainable because being a member of the class was contingent upon the ultimate issue of causation

• Fifth Circuit held that if persons were linked by a common complaint, a class defined with reference to the ultimate issue in the case does not prevent class certification

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Ninth Circuit: Vizcaino v. Microsoft Corporation 401K

• District Court stated that the class definition was

“circular” because it was framed in terms of the common legal issue linking the class members’ claims.

• Fifth Circuit held that a class definition is not “circular” just because it is framed in terms of the common legal issue linking class members’ claims

• Success of a claim hinging on the resolution of a disputed legal issue does not make a class definition “circular”

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Sixth Circuit: Young v. Nationwide Mutual Ins. Co. • District Court subdivided plaintiffs into ten certified subclasses

• On appeal to Sixth Circuit, Defendants challenged that the class

definition created an impermissible fail-safe class and was not administratively feasible

• Sixth Circuit stated that classes were not fail-safe because fail-safe classes must include “only those who are entitled to relief”

• Held that common proof of causation as a predominant issue for all of the plaintiffs’ claims is enough to defeat the classification as a fail-safe class

• Raised the bar for defendants in defeating class certification

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Biggest Factors in Determining Whether a Class is Fail-Safe

• Ascertainability

• Numerosity

• Commonality and Typicality

• Predominance

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Res Judicata and Fail-Safe Classes

• Allows class members to re-litigate claims if

there is an adverse judgment • Reinstates one-way intervention

36

37 Chicago, IL Edwardsville, IL

Orange County, CA Los Angeles, CA Wilmington, DE Baltimore, MD

Great River, NY Marlton, NJ Philadelphia, PA Coconut Grove, FL

New York City

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Ascertainability Defense Strategies

Andrew Trask atrask@mcguirewoods.com

Does the definition use rhetorically weighted terms? Key words: “caused” “defective” “deceptive” “wrongfully”

If so: possible fail-safe class

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Does the definition specifically link to a harm? Does not have to be an explicit link. Allegation: “All SmartPhones are defective.” Definition: “All purchasers of SmartPhones” may be OK. Unless proof that only select SmartPhones had problem.

If not: overbreadth issue.

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Will class members need to offer any evidence? Proof of purchase? (Receipts, box tops, etc.) Affidavits? Other testimony?

If so: overbreadth/administrative feasibility.

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What kind of records are required? Important to know anyway to prepare for discovery requests. Is company in possession of all information necessary to identify

class members? Are all customers on the same database?

If records not available: administrative feasibility issue.

If multiple records required: possible administrative feasibility issue.

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Is this really a predominance/superiority issue? Allows for framing issue in multiple ways. Definition is overbroad Individual issues (liability, injury) predominate Notice and class management would be next to impossible

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Can it be cured by amendment? If not, Motion to Strike Class Allegations may be

appropriate.

Many defects cannot be cured, the problem just changes: Taking causation out of definition: merits-based to overbroad Adding causation/harm in: overbroad to merits-based Adding “objective” criteria that don’t exist: overbroad to

administratively infeasible

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