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Thursday, July 30, 2015

Ind. Courts - "7th Circuit roundly rejects 3rd Circuit ‘ascertainability’ framework"

Alison Frankel of Reuters' "On the Case" wrote yesterday on Tuesday's 7th Circuit opinion in Mullins v. Direct Digital. The long story begins:

Class action lawyers may want to get up a petition to declare July 28 “Judge David Hamilton Day” because they could not have asked for a stronger defense of class actions – and the existing federal rules governing class certification – than they received Tuesday in Hamilton’s opinion for a three-judge panel of the 7th U.S. Circuit Court of Appeals in Mullins v. Direct Digital. The 7th Circuit scrutinized the 3rd Circuit’s controversial requirement of a “reliable and administratively feasible” way to ascertain class membership – and wholly rejected it. According to Judge Hamilton and his panel colleagues, Judges William Bauer and Michael Kanne, the 3rd Circuit’s 2013 ruling in Carrera v. Bayer upset the federal rules’ carefully wrought framework for class certification.

“The heightened ascertainability requirement,” the opinion said, “gives one factor in the balance absolute priority, with the effect of barring class actions where class treatment is often most needed: in cases involving relatively low-cost goods or services, where consumers are unlikely to have documentary proof of purchase.”

The 7th Circuit’s precedent, Judge Hamilton wrote, already requires trial courts to deny certification to proposed classes that are too vaguely defined, rely on subjective criteria such as someone’s state of mind, or contain “fail safe” provisions that depend on the defendant’s liability. And according to the 7th Circuit, that’s enough.

The court considered four policy justifications for a heightened ascertainability requirement: administrative convenience, unfairness to absent class members, unfairness to bona fide class members, and due process for defendants. According to the 7th Circuit, the procedural rules for class actions – which don’t specifically address ascertainability – already take care of those concerns.

Moreover, the 7th Circuit said (quite sensibly), it doesn’t make any sense to refuse to certify classes to protect absent and bona fide class members under the theory that they may not get the recovery they’re entitled to unless plaintiffs can show a way to weed out unqualified class members. Without certification, Judge Hamilton wrote, those class members will receive nothing.

“In general, we think imposing this stringent version of ascertainability does not further any interest that is not already adequately protected by the (federal) rule’s explicit requirements,” the opinion said. “On the other side of the balance, the costs of imposing the requirement are substantial.”

Importantly, the 7th Circuit explicitly said affidavits from class members are an acceptable way to ascertain who is in a class – a methodology the 3rd Circuit specifically ruled out in its Carrera decision. Judge Hamilton said that as long as defendants have an opportunity to challenge “self-serving affidavits from plaintiffs,” ascertaining class membership through plaintiffs’ testimony doesn’t impinge on defendants’ rights. After all, he said, “we are aware of only one type of case in American law where the testimony of one witness is legally insufficient to prove a fact” – and that’s prosecution for treason. “There is no good reason to extend that rule to consumer class actions,” Hamilton wrote.

The 7th Circuit said it agreed to consider Digital Direct’s interlocutory appeal because it wanted to address what it called “the recent expansion of ‘ascertainability.’”

The ILB recommends for reading both the remainder of the article, plus the opinion itself.

Posted by Marcia Oddi on July 30, 2015 10:15 AM
Posted to Ind. (7th Cir.) Decisions