A recent decision from the United States Court of Appeals for the Third Circuit has erected a substantial barrier to classes being certified in consumer products cases, especially cases involving products sold to consumers through third parties such as retailers in which consumers do not routinely provide contact information at the point of sale. On August 21, 2013, in Carrera v. Bayer Corp., the Third Circuit vacated the certification of a Rule 23(b)(3) class of purchasers of a Bayer diet supplement. No. 12-2621, 2013 WL 4437225 (3d. Cir. Aug. 21, 2013). Bayer sold the supplement through retail stores rather than directly to consumers and had no records of the consumers who purchased the product. It challenged the ascertainability of the class, arguing that the members of the class could not be reliably identified because Bayer had no list of the ultimate purchasers of the supplement and purchasers of such a small consumer item likely would have discarded any proof of purchase.

The Third Circuit agreed with Bayer, holding that the District Court erred in certifying a class and sent the case back to the District Court with instructions to certify the class only if it actually would be possible to ascertain the identities of retail purchasers in a reliable way on a class wide basis. Relying on its recent holding in Marcus v. BMW of North America LLC, 687 F.3d 583 (3d. Cir. 2012), the court confirmed that any proposed method of ascertaining a class must be reliable and “administratively feasible,” avoiding fact-finding or mini-trials, and must permit a defendant to challenge the evidence establishing class membership. Id. at *5. Accordingly, prior to certifying a class, the court “must resolve the critical issue of whether the defendants’ records can ascertain class members and, if not, whether there is a reliable, administratively feasible alternative.” Id. at *3. The Court cautioned against any method of ascertaining the class solely by plaintiffs’ “say so,” such as class member affidavits. Id. This “rigorous approach” to ascertainability is necessary from the outset of the case to ensure that potential class members are properly identified and have the opportunity to opt out, to protect defendants’ due process rights “by requiring that a defendant be able to test the reliability of the evidence submitted to prove class membership,” and to safeguard the efficiencies of the class action mechanism. Id. at *4.

In Carrera, the plaintiff made two common arguments as to how he could ascertain class membership, both of which the Court rejected. First, he alleged that retailers maintained records of sales online or using customer loyalty cards. While recognizing that under the right scenario a retailer’s records could prove class membership, the Court held that the plaintiff came forward with no evidence in this case that the retailer records could ascertain purchasers of the supplement or that records existed for the relevant time period.

Second, plaintiff proposed ascertaining the class through affidavits of class members, arguing that the low value of the claim would deter fraud, screening methods can detect unreliable affidavits, and that Bayer’s total liability under Florida’s Unfair Trade Practices Act does not rest on the reliability of class member affidavits in any event. The Court rejected plaintiff’s arguments. The Court held that whether class members have sufficient motivation to fabricate claims is irrelevant; instead, the “core concern” is whether the defendant is able to challenge the evidence of class membership. With no record of purchase required, the certification process would not provide defendant an ability to effectively make that challenge. Id. at *6.

The court further rejected plaintiff’s proposed screening model which was adopted from settled cases in which class membership is proven via claim form, holding that such methods lacked demonstrated reliability in cases where liability is challenged. Id. at *8. But the Court left the door open on remand for plaintiff to demonstrate “a screening model specific to this case and prove how the model will be reliable and how it would allow Bayer to challenge the affidavits.” Id. For example, plaintiff potentially could attempt to demonstrate that the percentage of claims screened under the model accurately would equate to the actual percentage of false claims in the data set. The Court also held that even if fraudulent claims did not affect Bayer’s total liability under the statute, they would still dilute the recovery of actual class members, which is a structural problem of the class because “ascertainability protects absent class members as well as defendants.” Id. at *7.

Carrera’s ascertainability holdings present a significant tool for defendants facing consumer class actions where there are no reliable sales records to identify specific purchasers, such as lawsuits against Defendants who do not sell directly to consumers. This likely would include lawsuits brought against food manufacturers and makers of other relatively low-value consumer products. Plaintiffs in the Third Circuit now face a much higher hurdle for certifying consumer class actions and likely will be required to demonstrate that sales record data actually exists and identifies the specific purchasers of the product at issue. This will be a substantial barrier in many class actions brought under the New Jersey Consumer Fraud Act, N.J. Stat. Ann. § 56:8-1 et seq., which has been a favorite cause of action for plaintiffs’ class counsel. We will be tracking closely whether other circuits and district courts follow Carrera.