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In a recent unpublished decision, District Judge Robert B. Kugler of the U.S. District Court for the District of New Jersey analyzed the ascertainability prong on a motion for class certification, applying the recent trilogy of Third Circuit cases that have addressed the issue and either denied or remanded the motion for class certification. See In re Paulsboro Derailment Cases, Civ. No. 13-784 (D.N.J. Aug. 20, 2014) (citing Marcus v. BMW of North America LLC, 687 F.3d 583 (3d Cir. 2012); Hayes v. Wal-Mart Stores Inc., 725 F.3d 349 (3d Cir. 2013); and Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013)).

In Marcus, Hayes and Carrera, the Third Circuit set forth a renewed emphasis on reviewing ascertainability at the class certification stage and increased the class plaintiff’s burden of satisfying ascertainability under Rule 23(b). The Paulsboro decision was issued in late August 2014, with the full benefit of Marcus, Hayes and Carrera.

Marcus v. BMW of North America

The Third Circuit’s first hard look at the ascertainability analysis took place in Marcus, where the Third Circuit addressed the issue as a “preliminary matter” (i.e., in dicta).[1] Here, the court noted that under Rule 23(b)(3) a class “must be currently and readily ascertainable based on objective criteria.” It observed that, if class members are impossible to identify without extensive and individualized fact-finding or “mini-trials,” then class action treatment is inappropriate.

The Marcus Panel also identified three important objectives served by the ascertainability requirement: (1) eliminating serious administrative burdens that are inconsistent with the efficiencies expected in a class action; (2) protecting absent class members; and (3) protecting defendants by ensuring that those bound by final judgment are clearly identifiable. While it addressed ascertainability as a “preliminary matter,” the court ultimately vacated the district court’s certification order based on plaintiff’s failure to satisfy the numerosity and predominance prongs of Rule 23.

Hayes v. Wal-Mart Stores Inc.

In Hayes, the Third Circuit went a step further, holding that the putative class members did not meet the ascertainability requirement on the existing record. Hayes explained that ascertainability includes two important elements. First, the class must be defined with objective criteria. Second, there must be a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition to survive ascertainability. Because the trial court, however, did not have the benefit of the Marcus decision when it certified the class, the case was remanded.

Carrera v. Bayer

Just a few weeks later, the Third Circuit addressed the ascertainability issue head-on, noting that the sole issue on appeal was “whether the class members are ascertainable.” In Carrera, plaintiff claimed that Bayer falsely and deceptively advertised its product, One-A-Day WeightSmart, which was promoted as a multivitamin that had metabolism-enhancing effects. Plaintiff, a Florida resident, moved to certify a Rule 23(b)(3) class of Florida consumers under the Florida Deceptive and Unfair Trade Practices Act. Bayer, however, never sold WeightSmart directly to consumers, and thus maintained no list of consumers. The parties also stipulated that class members were unlikely to have proof of purchase, such as packaging or receipts.

The Third Circuit analyzed plaintiff’s two proposed methods for ascertaining the class. First, plaintiff advanced that the class could be ascertained “by retailer records of online sales and sales made with store loyalty or rewards cards.” Bayer argued that only CVS Health Corp. — and no other retailer of WeightSmart — maintained a customer loyalty program from which data could be used to identify purchased products. The Third Circuit rejected this approach because “the evidence put forth by Carrera is insufficient to show that retailer records in this case can be used to identify class members.”

Plaintiff’s second proposed method for ascertaining the class was through “affidavits of class members,” attesting they purchased WeightSmart and stating the amount they purchased. Bayer argued that customer recollections were unreliable, and supported this claim with evidence that, at his deposition, Carrera had confused his purchases of WeightSmart with purchases of other products with similar uses. Plaintiff advanced three arguments in support of this affidavit method:

• class members will be unlikely to submit fraudulent affidavits based on the low value of the claims;
• ascertainability should be relaxed because defendant’s liability will be based on its gross sales in Florida — not on the size of the class; and
• a “screening method” will ensure that unreliable affidavits are identified and disregarded.

The Third Circuit rejected all three of these contentions. It rejected plaintiff’s “low value” argument because it failed to account for the fact that a class action defendant has a due process right to challenge class membership. It rejected plaintiff’s “liability” argument because it failed to consider: (1) the significant likelihood that class members’ recoveries will be diluted by fraudulent claims; (2) Bayer’s interest in only paying legitimate claims to prevent future litigation by disgruntled class members. It also rejected plaintiff’s “screening method” argument because it did not propose a specific screening model for this case and, in any event, cast doubt on whether any specific “screening method” would pass muster.

As a result of the Carrera decision, in the Third Circuit, going forward, the plaintiff must demonstrate ascertainability at the class certification stage, and a class will not be certified if plaintiff merely indicates that such evidence will be produced later. (“In sum, to satisfy ascertainability as it relates to proof of class membership, the plaintiff must demonstrate his purported method for ascertaining class members is reliable and administratively feasible, and permits a defendant to challenge the evidence used to prove class membership.”)

In re Paulsboro Derailment Cases

With the benefit of Marcus, Hayes and Carrera, the Paulsboro plaintiffs sought to certify subclasses of individuals and businesses based on a trail derailment in Paulsboro, New Jersey. The train contained a dangerous chemical substance that was released into an adjacent creek and into the air. As a result, nearby residents and businesses were required to either evacuate or “shelter in place” for several days.

In deciding plaintiffs’ motion for class certification, the court was confronted with proposed subclasses of: (1) individuals who evacuated and incurred nonmedical expenses; (2) individuals who evacuated and lost income; and (3) businesses that lost income. After summarizing the Third Circuit’s recent ascertainability analysis set forth in Marcus, Hayes and Carrera, the district court held that both individual subclasses met the ascertainability standard, but that the business subclass did not.

As to the individual subclasses, the court held that "the controlling requirement is not that no fact-finding be necessary, but that extensive individualized fact-finding cannot be required if a class is readily ascertainable." In finding that the individual subclasses were ascertainable, the court noted that:

• the areas in which the class members were required to have resided had “well-defined geographical boundaries” that residence could “be ascertained through public records such as tax and census records”;
• whether putative class members incurred expenses or lost income due the evacuation/shelter order was “an objective inquiry” that could be answered by asking a single question; and
• the proposed subclasses “contemplate that class members will have some documentation of their expenses or income loss.”

In finding that the proposed subclass of businesses was not ascertainable, the court held that “significant individualized fact-finding would be required to show that a potential class member” was: (1) physically located within a defined zone; (2) incorporated in New Jersey; (3) suffered economic loss; and (4) those losses were a result of the derailment. The court also rejected plaintiffs’ attempt to satisfy the ascertainability requirement for the business subclass through a supplemental affidavit from an expert witness.[2]

Paulsboro is the most recent example of a district court decision addressing ascertainability based on Marcus, Hayes and Carrera and provides a cohesive framework and sound reasoning while giving circumstances within which a class is — and is not — ascertainable. It further demonstrates that — outside the context of consumer fraud class actions, where class membership is typically more difficult to verify and thus highly scrutinized — plaintiffs can still overcome the ascertainability hurdle notwithstanding Marcus, Hayes and Carrera.

[1] Plaintiff was suing on behalf of all purchasers and lessees of certain model-year BMWs equipped with Bridgestone run-flat tires and claimed the tires were highly susceptible to flats and could only be replaced and not repaired.

[2] Notwithstanding its finding that plaintiff had satisfied the ascertainability requirement with respect to the individual subclasses, the court denied the motion for class certification based the failure to meet the numerosity and predominance prongs of Rule 23(a).

"Class Ascertainability Continues To Become More Concrete," by David C. Kistler and Rachel Gallagher appeared in the September 16, 2014 edition of Law360. To learn more, please click here or visit www.law360.com. Reprinted with permission from Law360.