In Hayes v. Wal-Mart Stores, Inc., No. 12-2522 (3d Cir. Aug. 2, 2013), the Third Circuit took the opportunity to elaborate and articulate on the ascertainability standard under Fed.R.Civ.P. 23(b)(3). In Hayes, the plaintiff William Hayes filed suit against Wal-Mart Stores, Inc. (d/b/a Sam’s Club), alleging that Sam’s Club had improperly sold him a Service Plan on an “as-is” item (such as floor models, display items, and returned items). Hayes filed suit on behalf of himself and all others similarly situated in New Jersey alleging violations of the New Jersey Consumer Fraud Act, breach of contract, and unjust enrichment.
When consumers purchase an “as-is” item, the cashier at the point of sale performs a “price override” on the item by manually entering the discounted price. The sales platforms indicates that a price override was performed, but does not include the reason for the override. Significantly, price overrides are made for a number of other reasons besides selling as “as-is” item, including discounting items when a consumer shows that a particular item is being sold elsewhere for less money. While Sam’s Club stores keeps a separate log of “as-is” items in the stores, the log does not track the sale of “as-is” items.
The District Court certified a class of New Jersey consumers who had purchased a “Service Plan to cover as-is products” under Rule 23(b)(3), holding that class members could be determined with reference to “objective criteria” because the store logs indicated that 3,500 transactions occurred that included a price override and purchase of a Service Plan. Even though the logs did not differentiate whether the price override was the result of purchasing as “as-is” item or for another reason, the District Court reasoned that even if only 5% of the price overrides were for “as-is” items that were ineligible for a Service Plan, the class was sufficiently numerous. Wal-Mart appealed under Rule 23(f), arguing, inter alia, that the plaintiff failed to meet his burden of proof to show that there was a reliable means of ascertaining class members and that common issues predominated over individualized issues.
The Third Circuit vacated the decision and remanded for reconsideration in light of its 2012 decision Marcus v. BMW of North America, LLC, 687 F.3d 583 (3d Cir. 2012). While Haye’s class definition may have been founded upon an “objective definition” of class members, the Third Circuit held that Hayes had failed to meet his burden of proof to show, by a preponderance of the evidence, that there was a reliable and administratively feasible means of ascertaining class members based upon the logs without engaging in individualized analysis and “mini-trials” to determine whether a particular “price override” transaction was for an as-is item that was ineligible for a Service Plan.
The plaintiff argued that he should not be precluded from brining a class action because the defendant lacked certain records. But the Third Circuit squarely rejected this argument, holding that “the nature or thoroughness of a defendant’s recordkeeping does not alter the plaintiff’s burden to fulfill Rule 23’s requirements.” The Third Circuit further noted that while the ascertainability inquiry overlapped into the merits of the claim, such overlap was necessary under the Supreme Court’s holding in Wal-Mart Stores, Inc. v. Dukes and unavoidable under the circumstances, particularly where the inquiry is necessary to address and establish an element of the plaintiff’s own class definition; ultimately, the District Court cannot employ a “wait and see” approach as to any inquiry that bears on the requirements of meeting Rule 23.
The Third Circuit further held that while the line between ascertainability and predominance “is blurry” with respect to whether individualized inquiries are necessary, ascertainability is a distinct prerequisite to class certification and antecedent to any other elements. If class membership cannot be reliably ascertained, a class cannot be certified even if all other Rule 23 elements are satisfied.
