A recent decision by the U.S. Court of Appeals for the Third Circuit reaffirmed the importance of requiring a plaintiff in a class action to show there is a reliable and administratively feasible method for ascertaining who is in the proposed class. The Third Circuit vacated a district court’s grant of class certification in a class action against Wal-Mart.

In Hayes v. Wal-Mart Stores, Inc., plaintiff alleged that Wal-Mart, through its retail warehouse Sam’s Club, violated the New Jersey Consumer Fraud Act, breached its contracts with consumers, and was unjustly enriched by selling extended warranty plans on “as-is” items, even though the warranty terms excluded “as-is” items. The district court certified a class of New Jersey purchasers who purchased an extended warranty to cover an “as-is” product. Excluded from the class were purchasers of “as-is” products still covered by a full manufacturer’s warranty—as those products would be covered by the extended warranty—and consumers who had been reimbursed for the cost of the extended warranty.

The Third Circuit granted Wal-Mart’s interlocutory appeal under Rule 23(f), vacated the certification order, and remanded the matter for further consideration in light of its 2012 decision in Marcus v. BMW of North America, LLC. In that opinion, the Third Circuit confirmed the equal importance of all elements of Rule 23, including ascertainability and numerosity. Citing recent U.S. Supreme Court precedent, including Wal-Mart v. Dukes and Comcast v. Behrend, as well as its own watershed opinion in In re Hydrogen Peroxide, the Third Circuit confirmed that even deep and significant inquiries into a claim’s merits are required if necessary to address the class certification requirements.

In assessing ascertainability, the district court in Hayes acknowledged that Sam’s Club had no method for determining how many “as-is” products were sold with an extended warranty. Nonetheless, the trial court concluded that “the Plaintiff should not be forestalled from class certification due to the Defendant's imprecise record keeping.” The Third Circuit rejected that reasoning, stating that “defendant’s recordkeeping does not alter the plaintiff’s burden,” and that “Rule 23’s requirements ... cannot be relaxed or adjusted on the basis of [plaintiff’s] assertion that Wal-Mart’s records are of no help to him.”

More broadly, the court reaffirmed that “if class members are impossible to identify without extensive and individualized fact-finding or mini-trials, then a class action is inappropriate.” In short, the Third Circuit reaffirmed plaintiff’s burden to show by a preponderance of the evidence that there is a “reliable and administratively feasible method” for ascertaining class membership. In addition, that evidence must constitute more than the mere “say-so of putative class members.”

The same fate befell the trial court’s numerosity analysis. Sam’s Club records established a potential pool of 3,500 customers, a subset of which would constitute the class. The trial court reasoned that “if even five percent” of that pool satisfied the class definition, “there would be 175 such purchasers, easily satisfying the numerosity requirement for present purposes.” The Third Circuit rejected this reasoning, holding that “where a putative class is some subset of a larger pool, the trial court may not infer numerosity from the number in the larger pool alone.” Reaffirming its holding in Marcus, the court stated that “[m]ere speculation as to the number of class members – even if such speculation is a bet worth making – cannot support a finding of numerosity.”

Importantly, the Third Circuit’s opinion in Hayes further confirmed that trial courts may not take a “wait-and-see approach” to Rule 23 requirements on the basis that the class can be decertified later, as doing so amounts to an impermissible conditional certification.

After concluding that the record did not satisfy Rule 23’s ascertainability or numerosity elements, the court vacated the certification order and remanded for further proceedings because the trial court’s opinion pre-dated Marcus. In doing so, however, the Third Circuit set a high bar for a second certification opinion.

Ballard Spahr’s Product Liability and Mass Tort and Consumer Class Action Litigation Groups have substantial experience defending consumer class actions, including economic loss, consumer fraud, and warranty claims. For more information, please contact Neal Walters at 856.761.3438 or waltersn@ballardspahr.com, Burt M. Rublin at 215.864.8116 or rublin@ballardspahr.com, or Michael R. Carroll at 856.761.3452 or carrollm@ballardspahr.com. 


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