Apr 29

Third Circuit Clarifies Its Ascertainability Requirement: A Two-Part Inquiry—But Only a Two-Part Inquiry

The Third Circuit’s recent decision in Byrd v. Aaron’s Inc., No. 14-3050, 2015 WL 1727613 (3d Cir. Apr. 16, 2015), reversed a district court’s denial of class certification because the lower court incorrectly applied the ascertainability requirement to plaintiffs’ proposed Rule 23(b)(3) classes. The appellate court noted “the apparent confusion in the invocation and application of ascertainability in this Circuit,” slip op. at 17, and sought to clarify what it described as “a relatively simple” two-part inquiry. Id. In a concurring opinion, however, Judge Rendell suggested that the full court should examine and “do away with” one part of the ascertainability inquiry because, in her view, it imposed too great a “proof-of-purchase requirement” on class actions involving low-priced consumer items for which buyers generally do not keep receipts. Id. (concurring op.) at 1, 4-5.

Byrd involves the claims of consumers who rented a laptop computer from Aspen Way, an Aaron’s franchisee. There was a dispute about whether required payments were being made, and an agent of Aspen Way came to the Byrds’ home to repossess the laptop. While there, the agent showed the Byrds a screenshot of a poker website Mr. Byrd had visited and a picture the laptop’s camera took of him. Aspen Way obtained the screenshot and picture using the Detective Mode function of software installed on the rented laptop that it could activate remotely. Slip op. at 9-10. The Byrds sued alleging violations of the federal Electronic Communications Privacy Act of 1986 (“ECPA”), 18 U.S.C. § 2511, and sought to represent a nationwide class of Aaron’s customers (and their household members) whose purchased or leased computers had the spyware installed and activated. Id. at 11-15.

Although it was clear that Aaron’s records could reveal which computers had the software installed and activated and could identify the customers who leased or purchased those computers, the district court denied class certification on the sole ground that Plaintiffs’ class definitions failed to satisfy the ascertainabilty requirement. Slip op. at 15. The district court faulted the proposed class definitions as being (a) underinclusive—because persons other than the owner or lessee (or their household members) could have used the computer and had their personal information captured; (b) overly broad—because not every activation of the Detective Mode function would state a claim under the ECPA for interception of an electronic communication; and (c) vague—because plaintiffs did not define “household members.” Id. at 29-43.

The Third Circuit reversed the district court’s ascertainability finding and explained that, while some of the lower court’s concerns might be relevant to other matters under Rule 23(b)(3) (e.g., typicality or predominance), they were not pertinent to the ascertainability requirement. The appellate court examined each of its four decisions since 2012 that addressed the ascertainability requirement under Rule 23(b)(3) and said:

The ascertainability inquiry is two-fold, requiring a plaintiff to show that: (1) the class is “defined with reference to objective criteria”; and (2) there is “a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition.” The ascertainability requirement consists of nothing more than these two inquiries. And it does not mean that a plaintiff must be able to identify all class members at class certification—instead, a plaintiff need only show that “class members can be identified.”

Slip op. at 22-23 (quoting Hayes v. Wal-Mart Stores, Inc., 725 F.3d 349, 355 (3d Cir. 2013), and Carrera v. Bayer Corp., 727 F.3d 300, 308 n.2 (3d Cir. 2013)) (citations omitted). The court concluded that neither “underinclusiveness” nor overbreadth is an appropriate consideration in assessing whether a proposed class is ascertainable. Slip op. at 33-35. And because the Byrds asserted that they intended the plain meaning of “household members” (as used for census or tax purposes) and could identify those class members simply by matching addresses in public records with the addresses of the purchasers and lessees of Aaron’s computers obtained from defendants’ records, the court held that the district court abused its discretion in determining that “household members” was inherently vague. Id. at 38-43.

The Byrds had shown that objective records—Aaron’s own records and public records—could be used to identify members of the proposed classes. The proposed classes were therefore ascertainable. Slip op. at 38, 43. The court remanded the case to permit the district court to consider the other Rule 23 requirements.

The Byrd opinion explained that the Third Circuit’s two-part ascertainability requirement “takes a forward-looking view of the administration of the Rule 23(b)(3) class-action device in practice” and “ensures that a proposed class will actually function as a class.” Slip op. at 21. A plaintiff seeking class certification “must prove by a preponderance of the evidence that the class is ascertainable” and cannot merely propose a method of ascertaining the class without presenting evidence that the method will work. Id. at 22, 25. The court repeated the caution it first articulated in Marcus v. BMW of North America, LLC, 687 F.3d 583, 594 (3d Cir. 2012), “against approving a method that would amount to no more than ascertaining by potential class members’ say so.” Slip op. at 25. But it emphasized that the requirement is one of showing that class members can be identified: “Accordingly, there is no records requirement.” Id.

Judge Rendell’s concurring opinion agreed that the Byrds’ proposed classes were ascertainable. She suggested, however, that the Third Circuit’s “heightened ascertainability requirement defies clarification” and “narrows the availability of class actions in a way that the drafters of Rule 23 could not have intended.” Slip op. (concurring op.) at 1. In particular, she described the second element of the two-part test—“‘a reliable administratively feasible’ method of determining who fits into the class”—as putting “the class action cart before the horse[.]” Id. (concurring op.) at 4, 6. And more importantly, she argued, by imposing such a standard at the class certification stage, “[w]e have effectively thwarted small-value consumer class actions by defining ascertainability in a way that consumer classes will necessarily fail to satisfy for lack of adequate substantiation.” Id. (concurring op.) at 6-7.

The proper scope of an ascertainability inquiry as a prerequisite to class certification under Rule 23(b)(3) has divided district courts across the country. The Ninth Circuit has an appeal before it that asks that court to address the ascertainability requirement. See Jones v. ConAgra Foods, Inc., No. 14-16327 (9th Cir.). The Third Circuit denied en banc review of the Carrera decision last year—over the dissent of four judges, including Judge Rendell. In Byrd, the court has now clarified that its ascertainability test requires a two-part analysis—but only a two-part analysis.

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