The 7th Circuit’s July 28th decision in Mullins v. Direct Digital, LLC has already created quite a stir. Plaintiffs’ lawyers are citing it as the antidote to the 3rd Circuit’s recent line of cases on the implied requirement of ascertainability, including its 2013 decision in Carrera v. Bayer Corp., the case that is cited in the first paragraph of Mullins and that the Seventh Circuit expressly declines to follow. At issue is whether ascertainability, which even the 7th Circuit describes as a “long recognized” requirement, should have one prong or two. The one-prong approach that the Mullins court adopts asks only whether class membership is defined by objective criteria. The second prong of what the 7th Circuit refers to as the “heightened ascertainability requirement” that the 3rd Circuit employed in Carrera and several other decisions asks whether there is a reliable and administratively feasible way to identify the members of the class. In Mullins, the 7th Circuit rejects this prong, and holds that courts deciding class certification motions should consider the feasibility of identifying class members only as part of what it describes as a more balanced superiority analysis (focusing on the manageability of the class action), which also takes into account whether there are alternatives to class action treatment for the vindication of class members’ purported rights.
Companies defending consumer class actions in particular will not welcome Mullins, for good reason. Although the decision is thoughtful and well written, a careful reading reveals certain assumptions about class actions that help to determine its outcome. For example, the court treats Carrera as imposing a “heightened” requirement, as if pre-Carrera case law (or, more accurately, case law prior to the 3rd Circuit’s 2012 decision in Marcus v. BMW of North America, LLC) did not include the “reliable and administratively feasible” prong in the ascertainability analysis. Yet the court fails adequately to demonstrate that the Carrera test raised the bar for ascertainability, and that Mullins itself is not the outlier, lowering the bar that many other courts have long imposed. In fact, courts have applied the two-pronged test before Carrera, and the 7th Circuit’s description of it as a “new component to the ascertainability requirement” should not be accepted at face value.
More important, consider the implications of Mullins. It stands for the proposition that it may be appropriate to certify some classes where class membership cannot be determined in a reliable and administratively feasible manner. While the 7th Circuit might find that some such cases fail Rule 23(b)(3)’s superiority requirement and therefore should not be certified, the essential holding of Mullins is that some such cases should be certified. It reaches that conclusion in a case in which it assumes that the defendant “will have no records for a large number of retail customers,” and “that many consumers [of defendant’s product] are unlikely to have kept their receipts since it’s a relatively inexpensive consumer good.” And it gets there by concluding that the two-pronged approach will effectively bar low-value consumer class actions, and detract from the ability of class actions to deter corporate wrongdoing.
While the court’s consumer-protection goals may be laudable, it furthers them through an intellectual technique courts often employ when stretching the bounds of class certification, a sort of willful blindness to the practical difficulties that will confront defendants wishing to exercise their due process rights and courts duty-bound to uphold them. For example, the 7th Circuit reasons that “District Courts have considerable experience with and flexibility in engineering solutions to difficult problems of case management. . . . In addition, a district judge has discretion to (and we think normally should) wait and see how serious the problem may turn out to be after settlement or judgment . . . .” Similarly, in expressing its willingness (unlike the 3rd Circuit) to accept affidavits as proof of class membership, the court says that due process will be protected “so long as the defendant is given a fair opportunity to challenge the claim to class membership and to contest the amount owed each claimant during the claims administration process,” and that, “[a]s long as the defendant is given the opportunity to challenge each class member’s claim to recovery during the damages phase, the defendant’s due process rights are protected.”
In a case involving thousands, tens of thousands, or even hundreds of thousands of potential class members, and where no records exist from which class membership can readily be determined, how is a defendant supposed to challenge each claim, real or fraudulent, presented against it, or contest the amount that each claimant seeks? The 7th Circuit provides no answers to these questions, other than to rely on the creativity of district court judges on whom it is now imposing these impossible tasks. Such a kick-the-can-down-the-road approach to class certification, while hardly unique to Mullins, risks burdening parties and the courts with costly and time-consuming litigation, and pressuring defendants to settle unmeritorious cases, in cases that never should have been allowed to advance past the class certification stage.
There is a reason that the 3rd Circuit and other courts employ a “reliable and administratively feasible” prong in their application of the implied requirement of ascertainability, and a reason courts should continue to do so. Unless and until Mullins is struck down, one can only hope it will remain the exception and not the rule.