Ascertainability & In re Nexium – The Side-Effects Continue

As various contributors to this blog have noted (here, here, and here), a divided panel of the First Circuit adopted a “loose” approach to the ascertainability requirement in In re Nexium Antitrust Litigation.  Specifically, while acknowledging that “the definition of [a] class must be ‘definite,’” the majority concluded that this requirement could be satisfied by a claims process by which class members would submit affidavits to show that they were injured.  According to the majority, such a process would be sufficiently feasible and protective of the defendants’ Seventh Amendment and due process rights.  Judge Kayatta authored a vigorous dissenting opinion, noting the “limitations of using affidavits in the manner proposed by the majority.”

Recently, the District of Massachusetts relied on In re Nexium to find that a proposed class was sufficiently ascertainable under similar circumstances.  In that case, In re Asacol Antitrust Litigation, end-payor purchasers of certain pharmaceutical products alleged that the drug manufacturers engaged in anticompetitive activities that caused them to pay an overcharge.   As in In re Nexium, the defendants argued that the plaintiffs failed to propose an ascertainable class because they had not put forward an administratively feasible mechanism for distinguishing injured from uninjured class members.  Judge Casper disagreed, noting the plaintiffs’ proposal that class members submit claim forms to a claims administrator and citing In re Nexium for the rule that such a claims process would be feasible and consistent with due process.

Earlier this year, a similar ruling drew a Rule 23(f) petition that was denied over another strong Kayatta dissent.  In that case, In re Dial Complete Marketing and Sales Practices Litigationthe District of New Hampshire certified a class of consumers who had purchased antibacterial soap even though the defendants lacked any records identifying class members and the class members themselves were unlikely to possess records showing their purchases.  According to Judge McAuliffe, In re Nexium “plainly support[s] the view that testimonial affidavits and declarations are an acceptable methodology for establishing class membership at the liability stage of a case.”  The First Circuit denied the defendant’s Rule 23(f) petition, concluding that the defendant failed to “demonstrate that the district court’s Rule 23 analysis is sufficiently ‘questionable’ to warrant immediate review.”

There are indications, however, that the debate over the In re Nexium approach may yet continue.  In his dissent from the denial of the Rule 23(f) petition in the Dial litigation, Judge Kayatta noted that In re Nexium had “struck [him] as a bad idea” because a claim submission process involving “hundreds of thousands of affidavits meant either that the defendant would have no practical ability to challenge the affidavits, or that the class action would become unmanageable.”  In Judge Kayatta’s view, affidavits can be “easily” challenged in individual litigation, but he “had trouble seeing how the same can be accomplished” in class litigation involving hundreds of thousands of claimants.  He found certification of a class to be “at best premature” because the district court did not explain how it would conduct a claims process in a manner that was both manageable and consistent with due process.  Judge Kayatta believed the Dial litigation presented the First Circuit with the opportunity to “wrestle with the issues raised by” the ascertainability-by-affidavit approach.  In his words, “the casual reliance on ‘say-so’ affidavits without any analysis of whether and how the assertions in such affidavits might reasonably be challenged will eventually eliminate the requirements of Rule 23(b)(3) and turn courts into claims administrators who pay no heed to the guarantees of the Seventh Amendment.”  He urged that the First Circuit adopt “some modicum of rigor before any further mischief can result.”

It may be that this debate will only be resolved by the Supreme Court.  As has also been noted previously on this blog (here), there is a growing split among the federal circuits regarding ascertainability.  The Third and Eleventh Circuits have required something more than self-serving affidavits, while the Sixth, Seventh, Eighth, and Ninth Circuits have agreed with the First Circuit.  Unless and until the First Circuit takes up Judge Kayatta’s concerns, however, In re Nexium will continue to stand as an obstacle to defendants who raise ascertainability concerns at the class certification stage – though, as we have noted, In re Nexium had a unique procedural and factual background that may limit its relevance.