In a case that illustrates the growing trend in class certification law to rigorously evaluate a plaintiff’s contentions that he or she meets the Rule 23 class certification criteria, the Third Circuit vacated the New Jersey District Court’s certification of a class involving run-flat tires (“RFTs”). In Marcus v. BMW, Nos. 11-1192, 11-1193, slip op. (3d Cir. Aug. 7, 2012), the Court held that plaintiff had not presented sufficient evidence to demonstrate that he had met Rule 23’s numerosity and predominance requirements. The Third Circuit’s decision is replete with references to its seminal decision, In re Hydrogen Peroxide Antitrust Litigation, 552n F.3d 305 (3d Cir. 2009), in the which the Court emphasized the need for a rigorous analysis of the Rule 23 requirements.
Plaintiff’s case centered on his disappointment with the RFTs on the BMW he had leased, alleging that he had experienced four flat tires during his three year lease. Plaintiff did not allege that the tires failed to work as advertised. Indeed, each time he experienced a flat, he was still able to drive his car on the flat tire. Rather, Marcus alleged that the tires were “defective” because: (1) they were more prone to flats, punctures and bubbles than radial tires or other run-flat tires; (2) could not be repaired, but had to be replaced; and (3) were “exorbitantly priced.” Marcus brought claims under the New Jersey Consumer Fraud Act (“NJCFA”), and for breach of implied warranty, breach of contract and breach of the implied covenant of good faith and fair dealing. The district court had denied Marcus’s motion for certification of a nationwide class, but granted certification of a New Jersey class. Although, as the Third Circuit pointed out, the class definition was unclear (and will have to be clarified if the case goes forward on remand), the class seemed to include individuals who had bought or leased 2006-2009 BMW’s with Bridgestone RFTs in New Jersey.
It is unusual for a class not to pass muster under the numerosity requirement. However, here, the Third Circuit emphasized that just as with any other Rule 23 requirement, a named plaintiff must show that he or she has met the numerosity requirement by a preponderance of the evidence and “mere speculation is insufficient.” While Marcus offered evidence to support the certification of his proposed nationwide class, he failed to do so for a New Jersey class. Thus, the Third Circuit held: “Given the complete lack of evidence specific to BMWs purchased or leased in New Jersey with Bridgestone RFTs that have gone flat and been replaced, the District Court’s numerosity ruling crossed the line separating inference and speculation.”
Similarly, with regard to the predominance requirement, the Third Circuit held that Marcus had not met his evidentiary burden. In particular, Marcus could not show how common proof could be used to show that class members’ RFTs went flat because they were more prone to do so than radial tires, for instance, in a specific situation. Even Marcus’s own expert had opined that for the two flats examined, any tire would have gone flat under the circumstances, not just RFTs. Marcus’s common law claims could not meet the predominance requirement because his “common law claims require an individualized inquiry into why any particular consumer’s Bridgestone RFTs went flat and had to be replaced.” As for Marcus’s NJCFA claim, the key question is whether a consumer had an “ascertainable loss” because he or she received something less than expected. The district court assumed that that each class member suffered an ascertainable loss equal to the difference between “the value of product they expected to purchase minus the value of the product they actually purchased.” The district court then presumed causation under the NJCFA because plaintiff’s allegations were based on an omission rather an affirmative misrepresentation. The Third Circuit held that the district court erred in presuming causation because under any analysis, “what a class ‘expected’ . . . depends on what information, if any, about the alleged defects was available during the class period and whether that class member knew about it.” The district court abused its discretion in certifying the class because it failed to make factual determinations as to consumer expectations and whether they were sufficiently common to satisfy the predominance requirement.
This case exemplifies the growing trend for courts to fully examine the evidence presented at class certification. At least in federal courts, the “certify now, worry later” attitude toward class certification appears to be a thing of the past. A key issue in class action jurisprudence this year has been what the quantum of evidence is that is necessary to get a class certified, as well as whether that evidence must be shown to be admissible at the class certification stage. The Supreme Court likely will take up these and similar questions in their decisions in the Comcast and Amgen cases this term.
This blog originally appeared in Deborah’s blog, Renner on Class Actions, and is reprinted here with permission.