The Critical Importance—or Complete Irrelevance—of Class Ascertainability in the Class Certification Decision, and the Unacceptable Circuit Split

• Publication year: 2017
• Author: By Geoffrey Holtz and Nitin Jindal

THE CRITICAL IMPORTANCE—OR COMPLETE IRRELEVANCE—OF CLASS ASCERTAINABILITY IN THE CLASS CERTIFICATION DECISION, AND THE UNACCEPTABLE CIRCUIT SPLIT

By Geoffrey Holtz and Nitin Jindal¹

I. INTRODUCTION

In the last several years, nine federal courts of appeal have weighed in on whether determining the "ascertainability" of the proposed class is a relevant consideration at the class certification stage of a Rule 23(b)(3) damages case. This issue generally arises where the proposed class is large and disbursed, such as a class of retail consumers who purchased a product at a price that is alleged to have been elevated due to unlawful conduct, a claim that often arises in the context of antitrust or consumer fraud claims.

The circuit courts have diverged significantly on the issue of whether, as a component of the consideration of class certification under Rule 23 of the Federal Rules of Civil Procedure, a district court must determine whether the proposed class is "ascertainable"—i.e., whether the class is defined such that one can objectively determine who is a member, and whether there is an administratively feasible method to make that determination and provide notice to the class members as required by the Due Process Clause. Certain circuits have held that a class may not be certified unless the plaintiff demonstrates that the class is ascertainable, while other circuits have held that this is not a relevant consideration at all at the class certification stage.

The current circuit split on such an important issue is not tenable. As antitrust and class action practitioners generally are well aware, the class certification determination is often the dispositive decision in a case. In a category of consumer class action cases, that determination is now almost entirely dependent on the judicial circuit in which the case is filed. This promotes forum-shopping, which sound jurisprudence frowns upon. And with antitrust class actions often subject to district court assignment by the Judicial Panel on Multidistrict Litigation, the Panel's assignment decision can effectively decide the ultimate fate of the case.

In this article, we describe the current circuit split and define the relevant due process and Rule 23 considerations identified by the Supreme Court and courts of appeal that must factor into the question of ascertainability at the class certification stage. These considerations are often in direct conflict with one another. To date, none of the circuit courts that have addressed the ascertainability issues have properly considered all of the relevant due process and other considerations, with certain courts ignoring some key considerations and other courts ignoring different considerations. No circuit court has yet properly considered and worked to reconcile all of the relevant factors.

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We do not purport to propose the "right answer" to these questions here. Rather, our purpose is to identify the relevant due process and other considerations that should factor into the analysis and point out where the two camps of circuit courts have fallen short in their analyses in the decisions to date. If the circuit courts cannot bridge the gap with uniform guidance that properly takes into account all considerations relevant to the ascertainability issues, the Supreme Court needs to do so to resolve the current circuit split.

II. DEFINING "ASCERTAINABILITY" UNDER RULE 23

The term "ascertainability" in the context of class certification has been used inconsistently and imprecisely by the courts and commentators who have addressed the issues. Thus, we begin with some definitions and first principles to delineate the issues at hand.

The concerns relevant to this article arise in the context of a class action seeking damages, a Rule 23(b)(3) action. The requirements under the text of Rule 23 for maintaining a damages class action are familiar. First, the general prerequisites of Rule 23(a)—applicable to all class actions—must be satisfied:

(a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:

(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.²

If the court determines these prerequisites have been met, the additional requirements under Rule 23(b)(3) must then be satisfied:

(b) (3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include:

(A) the class members' interests in individually controlling the prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.³

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The plaintiff has the burden to establish that these requirements have been met in order for the court to certify the case to proceed as a class action.⁴

Beyond the requirements set forth in the text of Rule 23, courts have required that additional criteria be satisfied in order to certify a Rule 23(b)(3) damages class—sometimes expressed as an implicit component of one of the express requirements of the rule and sometimes not. For example, the class may not be defined in a way that precludes membership unless the defendant's liability is first established—e.g., a class definition such as "persons who are entitled to damages as a result of the defendant's conduct"—a so-called "fail-safe class." In Randleman v. Fidelity Nat'l Title Ins. Co., 646 F.3d 347 (6th Cir. 2011), the class definition was flawed because it only included those who were "entitled to relief." As the court explained, "[t]his is an improper fail-safe class that shields the putative class members from receiving an adverse judgment. Either the class members win or, by virtue of losing, they are not in the class and, therefore, not bound by the judgment."⁵

In addition, a class in which membership is dependent on a putative class member's state of mind or other subjective measure is too imprecise to certify. In Simer v. Rios, 661 F.2d 655 (7th Cir. 1981), a class consisting of persons who failed to apply or were discouraged from applying for public assistance because of invalid regulations was too indefinite for class certification. As the court explained, determining class membership would first require that those individuals who qualified for assistance be identified, which would itself be a tall order. "After completing this task, the court and parties would have to proceed with the Sisyphean task of identifying those individuals who not only qualified for CIP assistance, but also knew of the existence of the regulation and were discouraged from applying for assistance because of the" flawed regulation.⁶

A proposed class also may not be so broad as to include a significant number of class members who suffered no injury. One might avoid the problems addressed in the previous paragraphs by simply defining every class as "each and every individual residing in the United States," which would certainly be objectively specific and avoid the fail-safe concerns. However, this would raise all sorts of problems with providing notice, classwide proof, and manageability. Therefore, if "a class is defined so broadly as to include a great number of members who for some reason could not have been harmed by the defendant's allegedly unlawful conduct, the class is defined too broadly to permit certification."⁷ Thus, for example, in a claim involving an alleged conspiracy among freight railroads to fix shipping prices, the D.C. Circuit vacated an order certifying a class that included shippers operating under "legacy" contracts that set their rates before any alleged antitrust violation and could not have been injured by it. The presence of so many "false positives" can preclude class certification where the plaintiffs are unable to prove, through common evidence, that all class members were in fact injured by the alleged conspiracy.⁸ Nonetheless, the First Circuit has held that a "de minimis" number of uninjured class members does not defeat class certification⁹ although the precise line between a de minimis number and one that is too large to proceed as a class action remains uncertain.

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Thus, the umbrella term "ascertainability" embraces a number of issues either made expressly a part of the text of Rule 23 or developed by the courts—a class that is defined such that one cannot objectively determine who is, or is not, a member; a class in which membership turns on a liability determination; a class that includes too many members with no injury or right to recover, such that liability cannot be determined on a classwide basis; or a class that would involve too many administrative feasibility problems to justify proceeding on a class basis. Indeed, because of this imprecision in the term, the Ninth Circuit declined to address a purported "ascertainability" requirement in a recent decision.¹⁰

With these basic Rule 23 principles in mind, we first describe the recent key circuit court decisions that have addressed the role of the various "ascertainability" issues in the class certification context. The issue of administrative feasibility is generally front and center in these decisions, although the other issues that fall within the "ascertainability" label are also factors.

III. THE CIRCUITS' VARYING APPROACHES TO ASSESSING AN...