UNITED STATES – On July 28, 2015, the Seventh Circuit Court of Appeals issued its decision in Mullins v. Direct Digital, LLC, on the question of whether Rule 23(b)(3) imposes a heightened “ascertainability” requirement for class definition. Recent Third Circuit precedent — followed by some district courts within the Seventh Circuit — have held that plaintiffs must prove at the class certification stage that there exists a “reliable and administratively feasible way” to identify all members who fall within a class definition. However, the Seventh Circuit found no support in the language of Rule 23 for this prerequisite, ruling that the Rule 23 ascertainability mandate only required that a class “be defined clearly” and “that membership be defined by objective criteria.” The Court found that the policy concerns underlying a more rigorous ascertainability requirement were better addressed through careful balance of the manageability and superiority requirements of Rule 23.
Plaintiff Mullins sued Direct Digital (“DD”) alleging consumer fraud in connection with its sale of a pill to alleviate joint discomfort. Mullins alleged the “active” ingredient was simply a sugar pill and there was no scientific support for the numerous health claims touted by DD. A class was certified of all consumers who had purchased the product within the statute of limitations until the date of class notice. DD appealed, primarily arguing the class was not ascertainable because there was no feasible and reliable way to identify actual members of the class and that affidavits from class members were insufficient as a matter of law. The Court assumed for purposes of the appeal that DD would have no records for most of its retail customers and that the customer are unlikely to have kept their receipts.
The Seventh Circuit rejected DD’s arguments and ruled that a more “stringent version of ascertainability effectively bars low-value consumer class actions, at least where plaintiffs do not have documentary proof of purchases, and sometimes even when they do.” The Court discussed in detail but ultimately found unpersuasive the four policy concerns cited that other courts have cited to justify a heightened ascertainability bar at the time of class certification:
- Administrative Convenience — a focus on the costs and difficulty of class identification is better addressed with the framework of Rule 23(b)(3), which is “comparative” and requires a court to evaluate both the costs and benefits of the class device. “Imposing a stringent version of ascertainability because of concerns about administrative inconvenience renders the manageability criterion of the superiority requirement superfluous.”
- Unfairness to Absent Class Members — although an inability to precisely identify all class members may bind some without notice, due process does not require actual notice to all class members, and this concern “overlooks the reality that without certification, putative class members would not recover anything at all.”
- Unfairness to Bona Fide Class Members — although the risk of fraudulent claim submission is not zero, it can be managed through the claim administration process, and focus on this issue “has ignored an equally important policy objective of class actions: deterring and punishing corporate wrongdoing.”
- Due Process Interests of the Defendant — this should not be a certification issue, as courts can tailor claim verification procedures to provide defendants “a fair opportunity to present its defenses when putative class members actually come forward.”
As lower courts interpret the broad language of this decision, it will be interesting to evaluate whether the Seventh Circuit has now actually lowered the bar for class certification by arguably finding that a class action is the de facto superior method of adjudication for resolving low-value consumer claims. It will also be interesting to see whether a defendant’s putative right to challenge individual claims during the administration process actually provides the due process protection the Seventh Circuit asserts or simply increases pressure on defendants to settle to avoid costly and time-consuming litigation. And with a distinct split in the circuits, perhaps the Supreme Court will now consider this ascertainability issue.
