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Class actions are strange and dangerous things.  A cornerstone of American jurisprudence is that the government (including its courts) cannot deprive people (such as our clients) of their property without due process of law.  In civil litigation, the question of what process is “due” is easy, answered by the right to a jury trial in most instances.  Defendants get to put plaintiffs to their burdens of proof, and defendants are generally guaranteed the opportunity to challenge that proof on an individual basis and introduce cases of their own, all before the court will invoke the power to the state to transfer wealth from one party to another, or not, depending on the proof and the verdict.

Class actions turn this neat and impeccably fair model on its head.  In a class action, one person presents his case alone, purporting to represent others “similarly situated,” and the result can be binding on people who are complete strangers to the litigation.  Depending on the outcome, absent class members can lose their right to pursue claims for their own benefit, even though they had no involvement and no voice in the proceeding. Worse yet, a defendant can be obligated to pay money to people—maybe thousands of people—who have done nothing to prove their entitlement to payment at the defendant’s expense.  We watched a little bit of the U.S. Open tennis tournament over the weekend, and the signature phrase of a great player turned broadcaster comes to mind:  “You cannot be serious!

The rules underlying class actions, and particularly class certification, exist to protect against these travesties of justice.  We all know the familiar quartet of numerosity of class members, commonality of issues, typicality of claims, and adequacy of representation.  These requirements aim to ensure that a class action judgment cannot bind absent class members or force collective remedies on defendants without first guaranteeing that the class action is the worthwhile and best way to proceed.  They also see that proof of one person’s claim stands as a fair proxy for the absent many and that individual class representatives pursuing their individual interests to not sell out the absent class members.  There are many other requirements—a proper class definition, predominance of common issues, the superiority of a class action over other proceedings, manageability of a class action trial, fair and adequate notice, the opportunity to opt out.

Together these rules protect defendants and absent class members against the obvious abuses that class actions invite, and they protect rights of a Constitutional dimension.  That is why we find it genuinely disappointing, if not outrageous, when plaintiffs’ lawyers treat class action rules as mere formalities, as though the class action procedure is a flexible tool they can twist and bend to ease or eliminate their burdens.

A recent case from the Third Circuit gives us an outstanding treatment of yet another class action rule, one that does not often garner the limelight, but is critical nonetheless:  Ascertainability of class membership.  The marquee argument in opposition to class certification usually is that individual issues predominate over common issues, but we often argue in addition the plaintiffs’ proposed class is not ascertainable.  We recall one class action involving an implanted medical device where the plaintiffs defined their class as all patients treated with the device, excluding those with injuries “associated with” the device.  In other words, you had to determine injury and causation for every patient just to figure out who would be the class.  That was an ascertainability problem.  Class certification denied.

But back to the recent Third Circuit case.  The only issue on appeal in Carrera v. Bayer Corporation, No. 12-2621, 2013 WL 4437225 (3d Cir. Aug. 21 2013), was whether the plaintiffs’ proposed class was ascertainable, and while the district court had ruled that it was, the Third Circuit disagreed and reversed.  The plaintiffs had purchased an over-the-counter diet supplement and filed a class action claiming remedies under the Florida Deceptive and Unfair Trade Practices Act.

However, because the defendant did not sell the product directly to consumers, it had no list of purchasers, and consumers themselves were unlikely to have documentary proof of purchase either.  Id. at *1.  Again, the product was an OTC dietary supplement, but this issue arises with prescription drugs and medical devices all the time.  Medical device manufacturers and particularly drug manufactures almost never know the identity of the end users of their products, nor do they usually have the ability to find out even if they wanted to.

That is an ascertainability problem, but the district court certified a class of all persons who purchased the product in Florida anyway.  To the district court, ascertainability presented “speculative issues with case management” that were insufficient to prevent class certification.  Id. at *2.

If you were wondering why we went on for a while at the beginning of this post about the importance of class certification rules, we were leading up to this holding.  A class action cannot be fair and should not be certified if it is impossible to know who will be bound and who the defendant will be obligated to pay.  This is not a mere issue of “case management,” and if speculation is required to ascertain the scope of the class, that should be the end of the analysis.  We fear that this district court was swayed by the prospect of capturing thousands of claims with the stroke of a pen, but the rules that protect absent class members and defendants alike simply do not permit it.

The Third Circuit understood this and brought the analysis back to center.  “[A]n 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. . . .  ‘If class members are impossible to identify without extensive and individualized fact-finding or “mini-trials,” then a class action is inappropriate.’”  Id. at *2.  The Third Circuit explained the rationale of this observation as follows:

First, [the ascertainability requirement] eliminates
serious administrative burdens that are incongruous with the efficiencies
expected in a class action by insisting on the easy identification of class members.  Second, it protects absent class members by facilitating the best notice practicable . . . .  Third, it protects defendant by ensuring that those persons who will be bound by the final judgment are clearly identifiable.

Id. at *3.

The beauty of the Third Circuit’s opinion is how it ties ascertainability to the plaintiffs’ burdens and the importance of preserving the defendants’ rights to a defense.  According to the court, “A defendant in a class action has a due process right to raise individual challenges and defenses to claims, and a class action cannot be certified in a way that eviscerates this right of masks individual issues.”  Id. at *4.  This is a due process issue, and ascertainability provides due process by allowing a defendant to test the reliability of the evidence submitted prove the class membership.

The plaintiffs proposed two solutions.  First, they argued that the class could be ascertained from retailer records of sales made with loyalty cards, holding out CVS as an example.  The Third Circuit rejected this option because there was no evidence that a single class member could be identified through such records.  Id. at *5.  Maybe retailer records can prove class members in some cases, maybe they can’t in others.  Either way, this is a helpful reminder that plaintiffs bear the burden of proving the elements of class certification with evidence and that the district court is to apply a “rigorous analysis” to determine whether the requirements are met.  Vague assurances that everything will work out in the end or that plaintiffs intend to meet Rule 23 in the future do not cut it.

Second, the plaintiffs argued that class members could submit affidavits attesting to their purchases of the product, reasoning that class members “will be unlikely to submit fraudulent claims” and that the defendant’s total liability was capped at its total sales of the product in any event.  Id. at *6.  We paraphrase this proposal as follows:  “Just trust us.  The most you have to lose is everything.”  The court correctly rejected this suggestion because it ignored that the defendant must be able to challenge the evidence, which a cold affidavit would not permit, and because fraudulent claims would harm both the defendant and “true class members” by diluting their potential recovery.  Id at **6-7.  A proposed “screening model” was likewise insufficient because it could not establish that the affidavits would be
reliable either.  Id. at *7.

The Third Circuit vacated the order certifying the class and remanded to give the plaintiffs another opportunity to establish ascertainability.  We cannot see why the court gave the plaintiffs a second chance, especially after so carefully dismantling the class in a published opinion.  But let’s hope that this proposed class never again sees the light of day.  As we said at the outset, ascertainability does not get a lot of press, but we should consider it in every class action involving pharmaceutical products and medical devices.  The Third Circuit has provided a very useful roadmap.