Third Circuit clarifies its ascertainability rule but doesn’t remove it

Byrd v. Aaron’s Inc., 2015 WL 1727613, No. 14–3050 (3d Cir.
Apr. 16, 2015)
 
The Byrds filed a putative class action against Aaron’s for
violating the Electronic Communications Privacy Act of 1986. The court of
appeals reversed the district court’s finding that the proposed class was not
ascertainable.
 
Aaron’s rented a laptop to the Byrds.  They discovered that the laptop was
delivering screenshots of websites they visited as well as pictures of users to
Aspen Way (which collected for Aaron’s) through spyware called “PC Rental
Agent,” which could also collect keystrokes. In total, “the computers of 895
customers across the country … [had] surveillance conducted through the
Detective Mode function of PC Rental Agent.”
 
The Byrds proposed two classes:
 
Class I—All persons who leased
and/or purchased one or more computers from Aaron’s, Inc., and their household
members, on whose computers DesignerWare’s Detective Mode was installed and
activated without such person’s consent on or after January 1, 2007.
Class II—[The same, but including
Aaron’s Inc. franchisees].
 
The district court concluded that the proposed classes were
underinclusive because they did “not encompass all those individuals whose
information [was] surreptitiously gathered by Aaron’s franchisees,” and
overinclusive because not “every computer upon which Detective Mode was
activated will state a claim under the ECPA for the interception of an
electronic communication.”
 
The majority reasoned that the source of the circuit’s
ascertainability requirement was “grounded in the nature of the class-action
device itself.” A plaintiff must show that: (1) the class is “defined with
reference to objective criteria”; and (2) there is “a reliable and
administratively feasible mechanism for determining whether putative class
members fall within the class definition.” Plaintiffs don’t have to identify
all class members at class certification—a plaintiff need only show that “class
members can be identified.”
 
Carrera v. Bayer Corp.
rejected certification of a class of consumers who purchased Bayer’s One–A–Day
WeightSmart diet supplement in Florida. In that case, the court reasoned that retailer
records and class member affidavits attesting to purchases of the diet
supplement were insufficient.  Though retail
records “may be a perfectly acceptable method of proving class membership,” the
plaintiff’s proposed retail records did not identify a single purchaser of the
Bayer diet supplement.  And affidavits
risk relying on no more than potential class members’ say-so; there was no
reason to think plaintiffs’ proposal for screening out false affidavits would
work. “Remarkably, even the named plaintiff could not recall whether he had
purchased the diet supplement.”
 
However, Carrera specified
that “[a]lthough some evidence used to satisfy ascertainability, such as corporate
records, will actually identify class members at the certification stage,
ascertainability only requires the plaintiff to show that class members can be
identified.” Thus, the court here said, “there is no records requirement.” Carrera stood for the proposition that “a
party cannot merely provide assurances to the district court that it will later
meet Rule 23’s requirements,” or propose a method of ascertaining a class
without any evidence supporting the idea that the method will succeed.
 
Ultimately, ascertainability focuses on “whether individuals
fitting the class definition may be identified without resort to mini-trials.”  This is closely tied to the provision of a
proper class definition, using objective criteria and offering some assurance of
“a reliable and administratively feasible mechanism for determining whether
putative class members fall within the class definition,”  Ascertainability thus prepares a district
court to “direct to class members the best notice that is practicable under the
circumstances” if there is certification. 
 
The district court erred first by conflating standards
governing class definition with the ascertainability requirement.  It next abused its discretion in determining
that the proposed classes weren’t ascertainable because they were
underinclusive, since non-buyers/lessees might have had their information
surreptitiously gathered.  But the Byrds
asked for a class of all buyers/lessees exposed to the program.  “[R]equiring such specificity may be
unworkable in some cases and approaches requiring a fail-safe class.”  Having objective criteria isn’t the same as
defining a class in terms of legal injury. Those who are injured but excluded
from the class are simply not bound.  “Requiring
a putative class to include all individuals who may have been harmed by a
particular defendant could also severely undermine the named class
representative’s ability to present typical claims.”
 
In addition, the district court abused its discretion in
finding that the proposed classes weren’t ascertainable because they were
“overly broad.” Defendants argued that the class wasn’t ascertainable because
the definition was decoupled from the underlying allegations of harm. But
predominance and ascertainability are separate issues. They also argued that
the class was overbroad when putative members lack standing or haven’t been
injured, but that again conflated ascertainability, predominance, and Article III
standing.  Potential differences between
the proposed class representatives and unnamed class members “should be
considered within the rubric of the relevant Rule 23 requirements—such as
adequacy, typicality, commonality, or predominance.” If defendants want to
argue that all putative class members must have standing, that issue should
first be decided by the district court. 
(Nice dodge, there.)
 
The proposed classes of “owners” and “lessees” were
ascertainable. There are “objective records” that could “readily identify”
them, and finding to the contrary was abuse of discretion, as was the finding
that “household members” weren’t ascertainable. The district court thought that
this was too vague and hard to prove, but the Byrds argued that the plain meaning
was “all of the people, related or unrelated, who occupy a housing unit,” as
shown by multiple definitions used in government documents for census,
taxation, and immigration purposes. Though these documents contained slight
variations, there were various ways in which household members could be
identified and verified.  A form similar
to the government forms could be used to identify household members, and that
was a “far cry” from an “unverifiable affidavit” or lack of a methodology to
identify class members. Because the location of household members was already
known, there were unlikely to be serious administrative burdens.
 
There will always be some level of inquiry required to
verify class membership, but that doesn’t necessarily mean a mini-trial. “Carrera does not suggest that no level
of inquiry as to the identity of class members can ever be undertaken. If that
were the case, no Rule 23(b)(3) class could ever be certified.” Defendants
argued that their due process rights were at risk, but the Byrds weren’t
relying solely on unverified affidavits. 
“Any form used to indicate a household member’s status in the putative
class must be reconciled with the 895 known class members or some additional
public records.”  Defendants could
challenge the methods the Byrds used to identify them—after the other issues
were resolved on remand.
 
Judge Rendell concurred to note that “the lengths to which
the majority goes in its attempt to clarify what our requirement of
ascertainability means, and to explain how this implicit requirement fits in
the class certification calculus, indicate that the time has come to do away
with this newly created aspect of Rule 23 in the Third Circuit. Our heightened
ascertainability requirement defies clarification. Additionally, it narrows the
availability of class actions in a way that the drafters of Rule 23 could not
have intended.”  Paper trail requirements
were ill-advised, because most low-value consumer class actions don’t involve
such records. Judges worried about a mere say-so might require an affidavit
from another household member, or a doctor, or something else.

The justifications for this rule were insufficient.  First, the claim that it avoided
administrative burdens really meant “short-circuiting the claims process by assuming
that when individuals file claims, they burden the court. But claims
administration is part of every class action. Imposing a proof-of-purchase
requirement does nothing to ensure the manageability of a class or the
‘efficiencies’ of the class action mechanism; rather, it obstructs
certification by assuming that hypothetical roadblocks will exist at the claims
administration stage of the proceedings.”
 
Denying certification to later avoid problems with notice
also was senseless.  Rule 23 required the
“best notice that is practicable under the circumstances.”  Potential difficulties with providing
individualized notice to all class members shouldn’t be a reason to deny
certification of a class. Due process is satisfied when notice is “reasonably
calculated” to reach the defined class.
 
Finally, the Third Circuit expressed concerns for the due
process rights of defendants, but “there is no evidence that, in small-claims
class actions, fabricated claims impose a significant harm on defendants.” The
chances of perjury to receive “a windfall of $1.59” were “far-fetched at best.”
Although most injured people won’t take the effort to claim a few dollars, “in
the aggregate, this sum is significant enough to deter corporate misconduct.”
By “focusing on making absolutely certain that compensation is distributed only
to those individuals who were actually harmed,” the Third Circuit’s
ascertainability requirement “ignored an equally important policy objective of
class actions: deterring and punishing corporate wrongdoing.”
 
The due process concern was also overblown because damages
under Rule 23 are assessed in the aggregate, so whether an individual can show
membership in a class doesn’t affect defendants’ rights to avoid paying more
than they’re liable for. The related concern for diluting “deserving” class
members’ recoveries “is unrealistic in modern day class action practice, and it
makes little sense when used to justify the wholesale dooming of the
small-value class action such that no injured plaintiff can recover at all.”
This was in any event an implementation issue, not an ascertainability
issue.  The Third Circuit’s rule cut at
the heart of the class action mechanism, which makes the most sense when
individual claims are small but aggregate injury is large.  As Judge Rakoff wrote, “[w]hile a rigorous
insistence on a proof-of-purchase requirement … keeps damages from the
uninjured, it does an equally effective job of keeping damages from the truly
injured as well, and ‘it does so with brutal efficiency.’”

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