High Time for the Supreme Court to Review Ascertainability in Class Actions

Vol. 7, Issue 1//April 18, 2017

By Anthony Vale, Yvonne McKenzie, and Mary Margaret Spence
Pepper Hamilton LLP

I.  Overview

The U.S. Court of Appeals for the Ninth Circuit recently upheld certification of a class of retail purchasers of Wesson-brand cooking oil in a false advertising case, despite the fact that almost all class members will never be reliably identified. Briseno v. ConAgra Foods, 844 F.3d 1121 (9th Cir. 2017). The court’s decision elevates Rule 23 from a rule of civil procedure into a federal enforcement action whose principal beneficiaries often will be counsel for the class and one or more cy pres recipients, and not class members.

In Briseno (as in many consumer class actions), few members of the class will even submit a claim. Among those who do, most will have to guess whether they even purchased Wesson-brand oil, let alone how much they paid years ago and how many bottles of cooking oil they purchased, because they will have no records. The almost-inevitable settlement of this action may provide vouchers for class members to obtain free Wesson-brand cooking oil and will likely contain a cy pres provision for unclaimed settlement funds to go to a charitable entity selected by class counsel.

The Ninth Circuit is not alone in rejecting a requirement that the class is “ascertainable”—meaning that there is an administratively feasible means of identifying class members. The Sixth, Seventh, and Eighth Circuits have made similar rulings, as have California state courts.[1] But other circuit courts, including the Third Circuit and the Eleventh Circuit (in an unpublished opinion), disagree and insist that there must be a reliable method for identifying class members before a Rule 23(b)(3) class proceeds.[2]

The U.S. Supreme Court should determine whether ascertainability is required under Rule 23, given the importance of this issue and the clear circuit split. Because the decision on class certification is often the “defining moment” of a case,[3]Briseno will likely be settled unless the Supreme Court grants certiorari to review the decision on class certification.

The Third Circuit’s requirement that class members be readily identifiable promotes judicial economy, protects the due process rights of defendants and ensures that any awards go only to injured class members. The Ninth Circuit approach allows a class action to be certified regardless of whether individual members of the class paid any attention to the product labeling. It is time for the Supreme Court to settle the issue of ascertainability in class actions.

II.  The Briseno Case Is Another Contrived Class Action

Briseno has all the hallmarks of another lawyer-driven class action. The plaintiffs allege that ConAgra misleadingly promoted its cooking oil as “100% Natural,” when in fact the oil contained ingredients from bioengineered plants. Foods made from bioengineered (or GMO) plants have been around for decades, and one study estimated that the average American eats 193 pounds of GMO food per year.[4] In 2016, the National Academies of Science, Engineering and Medicine “found no substantiated evidence that foods from GE crops were less safe than foods from non-GE crops.”[5]

Plaintiffs’ counsel engaged experts to testify that it was “material” to consumers whether the product contained GMO ingredients and to conduct a regression analysis showing that Wesson charged a premium for the cooking oil because it was labeled “100% Natural.”[6]

Enormous effort and expense went into creating a record for the motion to certify a class, with numerous experts on both sides. The trial court wrote a lengthy opinion certifying a Rule 23(b)(3) class.[7]

III.  Analysis

A.   Strong Ascertainability Requirement Addresses Serious Manageability and Due Process Concerns

Any class requires an objective definition, and the class definition in Briseno did not fail that test. Rather, the problem was that class members were not ascertainable: that is, there was no way to identify even a small percentage of class members, and no way to ensure that any award of damages would go only to injured class members. Although the Ninth Circuit appeared to recognize these problems,[8] it deferred consideration of them to a later point in the action. Of course, that day will likely never come.

In upholding class certification, the Ninth Circuit correctly noted that Rule 23 contains no language requiring identification of class members at the outset.[9] The Ninth Circuit also noted that “neither Rule 23 nor the Due Process Clause requires actual notice to each individual class member,” and that “courts have long employed cy pres remedies when some or even all potential claimants cannot be identified.”[10] The Ninth Circuit’s view means that a Rule 23(b)(3) class action can be certified even if most class members will not be identified or benefit from the lawsuit brought on their behalf—and not care about the action, even if they knew about it.

In contrast, the Third Circuit has held that even if Rule 23 does not mention the word “ascertainability,” there must be “a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition.”[11] This strong ascertainability requirement protects the defendant’s due process right to “be able to test the reliability of the evidence submitted to prove class membership.”[12] The Third Circuit also identified as important: administrative convenience, allowing potential class members to identify themselves for purposes of opting out of a class, and protecting the rights of absent class members.[13]

In Briseno, the Ninth Circuit dismissed concern about the defendant’s due process rights to challenge a class member’s evidence, noting that if a “Wesson oil consumer were to pursue an individual lawsuit instead of a class action, an affidavit describing her purchases would create a genuine issue if ConAgra disputed the affidavit, and would prevent summary judgment against the consumer.”[14] This misses the point. Class actions must promote efficiency and judicial economy. Requiring a defendant to litigate the merits of each class member’s claim does not serve these goals. The Ninth Circuit’s blithe observation that there is no due process right to “a cost-effective procedure for challenging every individual claim to class membership,”[15] essentially eliminates the defendant’s rights.

A defendant’s right to challenge a person’s evidence of class membership and administrative convenience are two closely aligned concepts. If a defendant’s rights can be protected only by a time-consuming and unreliable process, then the foundation for a class action is destroyed. The Ninth Circuit and other circuits that reject a strong ascertainability requirement reduce these concerns from an essential prerequisite of manageability to just one factor to consider in certifying a class under Rule 23(b)(3).[16] These courts suggest that manageability concerns can be deferred “until later in the litigation.”[17] But in most cases, that time will never come because the certified class action will have been settled, in part because the cost to the defendant of analyzing every class member’s evidence is cost-prohibitive. The practical consequence is that the size of the class will be expanded to include people who, on closer analysis, would be found not to be class members or, as we explain below, people who were not injured.

B.  A Strong Ascertainability Requirement Ensures That Any Aggregate Award Goes Only to Injured Class Members

Another problem with Briseno and similar decisions is the absence of any mechanism to ensure that an award of damages will go only to class members who are injured and had standing to sue in federal court.

Circuit courts are currently split on whether unnamed class members must possess Article III standing.[18] In his concurring opinion in Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016), Chief Justice Roberts signaled his support for the view that class actions should only benefit injured class members, stating “I am not convinced that the District Court will be able to devise a means of distributing the aggregate award only to injured class members.”[19] The Chief Justice also noted that “Article III does not give federal courts power to order relief to any uninjured plaintiff, class action or not.”[20]

In Briseno, many class members would likely testify that they could not recall what brand of cooking oil they purchased, could not recall if the bottle carried the “100% Natural” label, did not give the statement a moment’s thought if they saw it, and have purchased large quantities of bioengineered food since without any qualms—maybe including Wesson-brand cooking oil labeled “100% Natural.” These class members suffered no concrete injury under Article III.[21] In a consumer class action like Briseno, this issue is amplified because establishing injury does not turn on any objective facts (e.g., in Tyson Foods, whether employees in fact worked more than 40 hours per week and thus qualified for overtime), but on the say-so and memory of the class members.

Under the Ninth Circuit decision, the problem of uninjured class members is kicked down the road to some hypothetical later stage of the case. This impractical result could be avoided by a rigorous analysis at the threshold by imposing a strong ascertainability requirement.

C.  Courts Can and Should Consider Ascertainability at the Class Certification Stage

Determining whether most class members can be identified and whether, in the event of a favorable result for plaintiffs, damages can be distributed only to those with a valid claim, are issues that can and should be addressed on the motion for class certification.

A class must be “sufficiently cohesive to warrant adjudication by representation.”[22] But a class in which most of the members cannot be identified (at least reliably) is not cohesive. Nor does such a class meet any test of superiority or manageability under Rule 23(b)(3).

The Ninth Circuit’s approach assumes an inherent deterrent value in low-dollar consumer class actions in which the vast majority of class members cannot be identified. The court lamented that a strong ascertainability requirement “would often be outcome determinative” and “there may be no realistic alternative.”[23] Because there is little incentive for an individual to pursue a low-dollar consumer claim on one’s own, consumers who are deceived by product labeling like the “100% natural” label in Briseno have little recourse absent the availability of the class action process. Proponents of the Ninth Circuit’s approach also argue that all consumers, even if they ignore product labeling, pay a price premium as a result of deceptive labeling.

A contrary view is that it would be a good thing to put a stop to the torrent of contrived class actions like Briseno. These cases are imposing a toll on retailers and manufacturers and enriching lawyers (on both sides), but doing almost nothing for consumers. As Judge Gorsuch once noted, “[w]hile plaintiffs attorneys have a strong financial incentive to bring even meritless suits if there’s a chance they will settle, and defendants have a strong incentive to settle them, neither has a particularly strong incentive to protect class members.”[24]  One study suggests that class actions usually produce little or no benefit for class members.[25]

The potential deterrent value of consumer class actions is not sufficient justification for trampling the rights of a defendant to litigation. The very real concerns about class manageability and due process weigh in favor of giving strong, if not preclusive, consideration to ascertainability at the class certification stage. Even if due process may not require notice to every member of the class, notice remains a critical feature of the class action, and courts should take into account the effectiveness of notice to the class at the certification stage.

Rule 23 is merely a rule of civil procedure. Therefore, it does “not abridge, enlarge or modify any substantive right.” 28 U.S.C. § 2072(b). If a class member would have had no standing to sue in federal court as an individual plaintiff, or to recover damages as an individual plaintiff, he can have no greater rights as a class member.[26] There is no exception from these basic principles for a Rule 23(b)(3) class action that is brought principally for the deterrent effect it may have on misleading advertising or over-reaching by defendants. The objective of deterrence does not authorize a court to use a rule of civil procedure to empower class counsel to bring an essentially client-less action to seek punishment of a defendant.

If deterring false advertising is a real concern, there are many ways in which government agencies can react to consumer complaints and take action. Apart from the Federal Trade Commission, almost every state has a consumer protection division within its attorney general’s office.[27] Indeed, the “superiority” requirement of Rule 23 raises the question as to whether class actions can ever be superior to other methods of adjudication in low-value consumer cases where there are inherent difficulties in identifying class members. When deterrence, rather than compensation, becomes the primary effect of the class action, a civil enforcement action brought by the state might be a superior method for serving the deterrence goal because people’s representatives, rather than a plaintiffs’ lawyer, must evaluate the societal merits of the case.

If Briseno is upheld, defendants face an uphill battle in defending consumer class actions. As the Ninth Circuit recognized, a defendant can “individually challenge the claims of absent class members if and when they file claims for damages.”[28] But doing so will come at significant cost, and after a defendant has already expended substantial sums litigating the merits of the case. Absent a defeat of class certification, a defendant’s best option for disposing of a class action suit is likely through Daubert challenges to plaintiffs’ experts on damages.

D.  Proposed Amendment to Rule 23 and the Fairness in Class Action Litigation Act

The Judicial Conference Committee on Rules of Practice and Procedure is considering proposed amendments to Rule 23, including an amendment to the provisions of the rule on approval of settlements. The proposed amended Rule 23(e)(2)(C)(ii) would instruct a judge, when approving a settlement, to take into account “the effectiveness of the proposed method of distributing relief to the class, including the method of processing class-member claims, if required.”[29] The proposed Committee Note does not provide much explanation for this tepid provision. The Note, however, suggests that a court should ask about the “anticipated rate of claims by class members” and goes on to state that “because some funds are frequently left unclaimed, it is often important for the settlement agreement to address the use of those funds,” citing section 3.07 of the American Law Institute’s Principles of Aggregate Litigation (2010).

The proposed amendments do not go far enough in requiring a court to consider at an early stage whether class members can be identified and compensated, as opposed to compensating some uninjured charity. Rather, the proposed Committee Note comes close to endorsing the diversion of the defendant’s money to uninjured cy pres recipients. This is a mistake. As Northwestern Professor Martin Redish has persuasively argued: “cy pres simultaneously facilitates the flaws and defects in general class action jurisprudence . . . Cy pres creates the illusion of class compensation. It is employed when – and only when – absent its use, the class proceeding would be little more than a mockery.”[30] Thus, it is up to the courts to ensure that class members are identifiable and actually injured. This can be satisfied by requiring a strong ascertainability requirement at the class certification stage.

One potential legislative fix to the problem of class actions like Briseno is the Fairness in Class Action Litigation Act, which has passed the House of Representatives and is currently before the Senate Judiciary Committee. Among other things, the bill provides that a court shall not certify a class unless “each proposed class member suffered the same type and scope of injury as the named class representative or representatives.”[31] Arguably, this language would prevent certification of a class when not all consumers noticed, much less cared about, a statement in product labeling. Plaintiffs would need to convince a court that the price premium paid by each consumer was sufficient to satisfy the same type and scope of injury requirement.

IV. Conclusion

In February 2016, the Supreme Court rejected a petition for certiorari to review the Seventh Circuit’s decision in Mullins, which refused to impose an ascertainability requirement. The Ninth Circuit’s Briseno decision presents an excellent opportunity for the Supreme Court to adopt the reasonable view of the Third Circuit in Carrera and other cases.


Author Bios

Anthony Vale is of counsel in the Health Sciences Department of Pepper Hamilton LLP. He was a partner from 1986 to 2016, with extensive experience in complex litigation.

Yvonne McKenzie is a partner in the Health Sciences Department of Pepper Hamilton LLP. She focuses her practice on counseling companies with products regulated by the FDA, including prescription medications, food and beverages.

Mary Margaret Spence is a senior attorney in the Health Sciences Department of Pepper Hamilton LLP. Her practice focuses on pharmaceuticals and medical devices.

[1] Sandusky Wellness Ctr., LLC, v. Medtox Sci., Inc., 821 F.3d 992, 995-96 (8th Cir. 2016); Rikos v. Procter & Gamble Co., 799 F.3d 497, 525 (6th Cir. 2015); Mullins v. Direct Digital, LLC, 795 F.3d 654, 658 (7th Cir. 2015), cert. denied, 136 S. Ct. 1161, 194 L. Ed. 2d 175 (2016). California state courts have similarly rejected any “necessity of identifying the individual members of such class as a prerequisite to a class suit.” Daar v. Yellow Cab Co., 67 Cal. 2d 695, 706 (Cal. 1967); see also Nicodemus v. Saint Francis Memorial Hosp., 3 Cal. App. 5th 1200, 1212 (Cal. App. 1st Dist. 2016) (there is no need for a representative plaintiff to “establish a means for providing personal notice of the action to individual class members”).
[2]See Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013); Byrd v. Aaron’s Inc., 784 F.3d 154 (3d Cir. 2015); Karhu v. Vital Pharms., Inc., 621 Fed. Appx. 945 (11th Cir. 2015).
[3] Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 162 (3d Cir. 2001).
[4] Press Release, Environmental Working Group, Americans Eat Their Weight in Genetically Engineered Food (Oct. 15, 2012), http://www.ewg.org/release/americans-eat-their-weight-genetically-engineered-food.
[5] Mark Lynas, Cornell Alliance for Science, GMO Safety Debate is Over (May 23, 2016), http://allianceforscience.cornell.edu/blog/mark-lynas/gmo-safety-debate-over. In 2016, Congress enacted the National Bioengineered Food Disclosure Standard, which included a provision that for purposes of regulations made pursuant to the statute, “a bioengineered food that has successfully completed the pre-market Federal regulatory review process shall not be treated as safer than, or not as safe as, a non-bioengineered counterpart of the food solely because the food is bioengineered or produced or developed with the use of bioengineering.” 7 U.S.C. § 1639b(b)(3). The FDA has also recognized that statements implying that foods that do not contain GMOs are safer than similar GMO-containing foods can be misleading. See FDA, Guidance for Industry: Voluntary Labeling Indicating Whether Foods Have or Have Not Been Derived from Genetically Engineered Plants (2015), http://www.fda.gov/Food/GuidanceRegulation/GuidanceDocumentsRegulatoryInformation/ucm059098.htm.
[6] In re ConAgra Foods, Inc., 90 F. Supp. 3d 919, 983 (C.D. Cal. 2015).
[7]See generally id.
[8] Footnote 6 in the Ninth Circuit’s opinion suggests that the court viewed these concerns as legitimate. Briseno, 844 F.3d at 1127, n.6.
[9]Id. at 1125-26.
[10]Id. at 1128-29.
[11] Hayes v. Wal-Mart Stores, Inc., 725 F.3d 349, 355 (3d Cir. 2013).
[12]Carrera, 727 F.3d at 307-08.
[13]See id. at 308, 313.
[14]Briseno, 844 F.3d at 1132.
[15]Id. (quoting Mullins, 795 F.3d at 669).
[16]See id. at 1127-28; Mullins, 795 F.3d at 663.
[17]See Mullins, 795 F.3d at 662.
[18]Compare Denney v. Deutsche Bank AG, 443 F.3d 253, 263-64 (2d Cir. 2006) (“no class may be certified that contains members lacking Article III standing”) and Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023, 1034 (8th Cir. 2010), with Kohen v. Pac. Inv. Mgmt. Co. LLC, 571 F.3d 672, 676 (7th Cir. 2009) (“as long as one member of a certified class has a plausible claim to have suffered damages, the requirement of standing is satisfied”) and Stearns v. Ticketmaster Corp., 655 F.3d 1013 (9th Cir. 2011).
[19]Tyson Foods, 136 S. Ct. at 1051. In Tyson Foods, employees alleged that they had not been paid for time donning and doffing work clothing, but whether a class member had a valid claim turned on individual issues.
[20]Id. at 1053.
[21] Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016). Nor did they suffer injury under California state law (one of the consumer protection statutes at issue in Briseno), which, at minimum, requires exposure to the false advertising and some connection between the alleged false advertising and the injury. See, e.g., Mazza v. Am. Honda Motor Co., 666 F.3d 581, 595-96 (9th Cir. 2012) (holding that a class under the False Advertising Law must include only members who were “exposed to advertising that is alleged to be materially misleading”); Sevidal v. Target Corp., 189 Cal. App. 4th 905, 924 (Cal. App. 4th Dist. 2010) (“Even after the Tobacco II decision, the UCL and FAL still require some connection between the defendant’s alleged improper conduct and the unnamed class members who seek restitutionary relief.”). California law also requires that the victim receive only a “measurable amount” of restitution. See, e.g., In re Vioxx Class Cases, 180 Cal. App. 4th 116, 136 (Cal. App. 2d Dist. 2009). A “measurable amount” of restitution is “[t]he difference between what the plaintiff paid and the value of what the plaintiff received,” and to establish this “there must be evidence of the actual value of what the plaintiff received.” Id. at 131.
[22] Amchem Prods. v. Windsor, 521 U.S. 591, 623 (1997).
[23]Briseno, 844 F.3d at 1128. The Seventh Circuit also noted that “[t]he 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.” Mullins, 795 F.3d at 662.
[24] Neil M Gorsuch & Paul B. Matey, No Loss, No Gain: The Supreme Court should make clear that securities fraud claims can’t dodge the element of causation, National Law Journal (Jan. 31, 2005), http://www.nationallawjournal.com/id=900005422578/No-Loss-No-Gain?slreturn=20170029150631.
[25]See Mayer Brown LLP, Do Class Actions Benefit Class Members?, https://www.mayerbrown.com/files/uploads/Documents/PDFs/2013/December/DoClassActionsBenefitClassMembers.pdf.
[26] Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 408 (2010) (“A class action, no less than traditional joinder (of which it is a species), merely enables a federal court to adjudicate claims of multiple parties at once, instead of in separate suits. And like traditional joinder, it leaves the parties’ legal rights and duties intact and the rules of decision unchanged.”)
[27]See, e.g., Website for the Office of the Attorney General of California, Protecting Consumers, https://oag.ca.gov/consumers.
[28]Briseno, 844 F.3d at 1131.
[29] Preliminary Draft of Proposed Amendments to the Federal Rules of Appellate, Bankruptcy, Civil, and Criminal Procedure, http://www.uscourts.gov/rules-policies/proposed-amendments-published-public-comment.
[30] Martin H. Redish, Cy Pres Relief and the Pathologies of the Modern Class Action, 62 Fla. L. Rev. 617, 623 (2010).
[31] H.R. 1297.