A panel of the Eleventh Circuit Court of Appeals, in an unpublished opinion, has issued a much-anticipated decision regarding the implicit ascertainability requirement for class certification. 

The court held that a plaintiff cannot establish that a class is ascertainable “simply by asserting that class members can be identified using the defendant’s records” or simply “by proposing that class members self-identify (such as through affidavits) . . . .” 

Instead, proponents of class certification must “establish that the [defendant’s] records are in fact useful for identification purposes, and that identification will be administratively feasible,” or that “self-identification is administratively feasible and not otherwise problematic.” 

The June 9, 2015,  decision is expected to make it more difficult in the Eleventh Circuit for putative class representatives to obtain certification of classes to pursue claims regarding small-dollar consumer goods and services, for which sellers do not maintain records of the end purchasers and for which purchasers are unlikely to maintain proofs of purchase.  

The majority and concurring opinions, however, provide examples of methods to identify class members, including self-identification, that may satisfy the ascertainability requirement.  The concurring opinion goes so far as to outline factors to be applied by district courts in determining whether self-identification satisfies the ascertainability requirement.

In light of this decision, plaintiffs in the Eleventh Circuit seeking to obtain certification of classes of purchasers of small-dollar products will likely look to take a deeper dive into the records of defendants and third-party sellers to demonstrate to the court that class members can feasibly be identified by records, and/or present a method of class member self-identification more robust than simply presenting receipts or attesting they purchased the product at issue. 

The Eleventh Circuit affirmed the district court’s holding that the classes were not ascertainable. 

In Karhu v. Vital Pharmaceuticals, Inc., Case No. 14-11648, in the United States Court of Appeals for the Eleventh Circuit, a panel of the Eleventh Circuit aligned with the Third Circuit on what plaintiffs must demonstrate to satisfy the implicit ascertainability requirement necessary to certify a class as set forth in Carrera v. Bayer Corp., 727 F. 3d 300, 310 (3d Cir. 2013).  In Karhu, the plaintiff-appellant appealed a decision of the District Court for the Southern District of Florida refusing to certify classes of purchasers of a weight loss supplement called VPX Meltdown Fat Incinerator, which was marketed by the defendant-appellee Vital Pharmaceuticals, Inc.  Karhu alleged that he and the members of the putative classes purchased Meltdown in reliance on Vital’s advertising that Meltdown aids in fat loss, which Karhu alleged it does not.  The district court held that the proposed classes did not satisfy Rule 23’s implicit ascertainability requirement, nor the requirements listed in either Rule 23(b)(2) or (3).  The Eleventh Circuit panel unanimously concluded that the district court’s decision on ascertainability was correct and, therefore, the panel affirmed without reaching the district court’s Rule 23(b) decision.  

The majority requires a rigorous analysis to ensure the implicit ascertainability requirement of Rule 23 is satisfied. 

The majority began with the basic principal that “to establish ascertainability, the plaintiff must propose an administratively feasible method by which class members can be identified.”  It held that simply proposing to use defendants’ records to identify class members, or proposing that putative class members self-identify, such as through affidavits, is not sufficient to establish the ascertainability requirement. 

Proposing to use defendants’ and third-party sellers' records is not enough. 

Where the plaintiff proposes using the defendant's records to identify class members, the court held, “the plaintiff must also establish that the records are in fact useful for identification purposes, and that identification will be administratively feasible.”  Karhu’s proposal to identify class members using Vital’s sales data, the court concluded, “was incomplete, insofar as Karhu did not explain how the data would aid class-member identification.”  Vital sold primarily to third-party retailers, not class members, and therefore, the court found, a potential identification procedure was not obvious.  In his motion for reconsideration, however, Karhu, for the first time, explained a three-step process to identify class members: (1) use Vital’s sales data to identify third-party resellers; (2) subpoena the retailers for their records; and (3) use those records to identify class members.  Notwithstanding, since Karhu had not presented this method in originally moving to certify the classes, the Eleventh Circuit panel unanimously concluded that Karhu’s proposal to identify class members using Vital’s sales data was “incomplete” and, therefore, that the district court acted within its discretion in concluding that Karhu had failed to demonstrate the ascertainability requirement was satisfied.   

Proposing self-identification by class members is not enough. 

The majority went on to announce that where a method of self-identification is proposed to satisfy the ascertainability requirement, the proponent must “first establish[ ] that self-identification is administratively feasible and not otherwise problematic.”  The court pointed out two, intertwined, potential problems with self-identification:

On the one hand, allowing class members to self-identify without affording defendants the opportunity to challenge class membership ‘provide[s] inadequate procedural protection to . . . [d]efendants’ and ‘implicate[s their] due process rights.’ . . . On the other hand, protecting defendants’ due process rights by allowing them to challenge each claimant’s class membership is administratively infeasible, because it requires a ‘series of mini-trials just to evaluate the threshold issue of which [persons] are class members.’ 

Ensuring the ascertainability of a class protects defendants’ due process rights, prevents fraudulent claims and helps ensure the plaintiffs are adequate representatives of the class. 

Karhu attempted to convince the Eleventh Circuit that “due process concerns” raised by Vital and the district court were a red herring by arguing that “defendants have no due-process right against unverified self-identification when the total liability will be established at trial, and will not change depending on the number of claims actually made.”  In rejecting this argument, the majority cited the Third Circuit’s decision in Carrera in stating that “a defendant’s due-process right against unverified self-identification is not only about total liability: It is also about ensuring finality of judgement.”  As the Carrera court held, “[i]f fraudulent or inaccurate claims materially reduce true class members’ relief, these class members could argue the named plaintiff did not adequately represent them . . . .  When class members are not adequately represented . . . they are not bound by the judgment.” 

Ultimately, the majority concluded that the district court acted within its discretion in rejecting identification via affidavit.  It held that “[b]ecause Karhu had not himself proposed an affidavit-based method, he necessarily had not established how the potential problems with such a method would be avoided.”  

The majority also rejected Karhu’s general arguments against a strict ascertainability requirement. 

In addition to arguing that the classes he proposed were ascertainable, Karhu argued that the district court “construe[d] the ascertainability requirement too strictly.”  First, Karhu argued that the a strict ascertainability requirement conflicts with the principle set forth in Klay v. Humana, Inc., 382 F.3d 1241, 1271-72 (11th Cir. 2004), that “a concern about case manageability should not stand in the way of certification.”  Next, Karhu argued that a strict ascertainability requirement “will eradicate small-dollar class-action claims.”  The Karhu majority rejected both arguments. 

Ascertainability and manageability are separate requirements.

Klay, the majority stated, did not bar its holding.  Klay “addressed manageability concerns that a court might face after class members have already been identified. . . . Ascertainability, by contrast, addresses whether class members can be identified at all, at least in any administratively feasible (or manageable) way.”  In other words, “the manageability concern at the heart of the ascertainability requirement is prior to, hence more fundamental than, the manageability concern addressed in Klay.” 

The ascertainability requirement will not eradicate small-dollar class claims.  

The majority further concluded that Karhu’s fear that “small-dollar plaintiffs will not be able to propose an administratively feasible method by which class members can be identified” was unfounded.  Karhu’s own counsel, the majority pointed out, had before “succeeded in proposing administratively feasible identification methods,” namely, by subpoenaing third-party retailors for their customer records.  Indeed, in his motion for reconsideration Karhu proposed to the district court that class members could be identified by this method.  Had Karhu proposed this method in his class-certification papers, the majority stated, “he might well have satisfied the ascertainability requirement.” 

A concurring opinion addressed the problems with a holding that would entirely preclude self-identification as a method for satisfying the ascertainability requirement in small-dollar product cases. 

The three-judge panel was unanimous in the decision that Karhu failed to demonstrate that the ascertainability requirement was satisfied in the case before it.  Nevertheless, Judge Beverly V. Martin wrote a concurring opinion to address what she saw as problems with a more general holding announced by some courts that “a prospective class of consumers of a small-dollar product is not ascertainable if the only way they can be identified is through self-identification.”  In her concurring opinion, Judge Martin expressed her concern that denying relief based on the court-created doctrine of ascertainability could erode the principle that the class action vehicle is intended to “‘vindicat[e] . . . the rights of groups of people who individually would be without effective strength to bring their opponents into court at all.”  She, therefore, rejected the district court’s reasoning regarding self-identification and its potential implications. 

Judge Martin examined opinions from courts that have grappled with whether affidavits can be a reliable way to identify class membership and identified two factors to which these courts look.  She advocated for combining the two factors to determine whether, in a particular case, affidavits from putative class members could be used to satisfy the ascertainability requirement.  Those factors are: “(1) the value of each class member’s claim, and (2) the likelihood that potential class members could accurately identify themselves.”  The first factor is examined to determine the likelihood that fraudulent claims would be filed.  Courts applying this factor, Judge Martin stated, certify “classes of purchasers of low-value items, such as supplements or bottled beverages, based solely on consumer self-identification,” but “have been more reluctant to certify classes when the per-class-member claim is large.”  Courts applying the second factor have reasoned that where a product at issue is similar to other products on the market, “consumers may find it hard to know whether they purchased” the product that is the subject of the action, or one of the similar products.  

Applying the two factors, Judge Martin postulated that Karhu “likely could have shown ascertainability.”  This is because, she pointed out, (1) “a bottle of Meltdown costs around $23, a small amount not likely to invite fraudulent claims” and (2) “Meltdown is a unique product in name, function, and appearance,” such that it would be unlikely that consumers would be unable to recall whether they are class members.”  Thus, she concluded, “self-identification would probably be a sufficient means of ascertaining a class of purchasers of a product like Meltdown.” 

Finally, Judge Martin suggested that district courts should do as she had and read the majority opinion narrowly as holding that “Mr. Karhu simply did not adequately argue his class was ascertainable before the District Court.”  She urged putative class representatives in future cases to “more clearly explain to the district courts how affidavits will reliably show class membership based on the two factors [she] noted above,” and expressly set forth her expectation that “the district courts will closely consider those arguments.”  Judge Martin warned, “To hold otherwise - rejecting affidavits as a legitimate means of class identification in every case - would make it considerably more difficult for consumers to bring class-action claims on small-dollar products where consumers and companies are unlikely to keep or retain records of purchase . . . precisely the ones that the mechanism of the class-action device was designed to foster.” 

In closing, Judge Martin stated that she “would like to see our courts continue to clarify the ascertainability doctrine so as not to eradicate the small-dollar consumer class action” and announced that “[w]hen timely presented, I would hold that affidavits are a sufficient means of identification for purchasers of a cheap, unique product like Meltdown.” 

Defendants should not expect to see fewer small-dollar class actions filed in the Eleventh Circuit. 

While the Karhu decision certainly provides defendants in the Eleventh Circuit more ammunition in challenging the certification of classes of purchasers of small-dollar products and services, it will not necessarily discourage the filing of such actions in the circuit.  The Eleventh Circuit’s unpublished decision is not binding and does not expressly prohibit any particular method of identifying class members - e.g., using defendant’s records, third-party records, or both; self-identification by presentation of proof of purchase, through affidavits, or both.  Rather, the decision is strong encouragement for district courts within the Eleventh Circuit to apply a rigorous analysis to ensure that the proposed method to identify class members will in fact do so in an administratively feasible manner that is not “otherwise problematic.” 

Taken together, the majority and concurring opinions provide examples of identification methods that may pass muster and criteria the district courts may apply in determining whether proposed methods satisfy the ascertainability requirement.  As a result of the decision, defendants can expect that plaintiffs will focus more of their pre-certification discovery efforts on defendants’ and third-party sellers’ records of purchasers.  Plaintiffs likely will also identify experts to offer and opine on methods to identify class members in a manner that is administratively feasible and avoids the other problems identified by the majority, such as trampling defendants’ due process rights, fraudulent claims, and inadequate representation.