Consumers’ ability to address and
seek redress for deceptive practices through private
litigation is threatened by a recent decision of the Third Circuit Court of
Appeals. In Carrera v. Bayer (like
the FTC case discussed in the post below, a case about deceptive practices involving a
dietary supplement), the court recently held that, if the defendant does not have
purchase records, a consumer class action cannot be certified based on sworn customer
affidavits. The court stated the "rigorous analysis"
requirement for class certification "appl[ies] to the question of
ascertainability," which the court called an "essential prerequisite
of a class action." (Where is ascertainability found in Rule 23? It
is not.)
Defense-side lawyers have been rightly touting the decision
as a huge win (see here and here, for example), and an article in Law 360 noted that the Third Circuit has
adopted “Unheard-Of Consumer Class Action Hurdle.”
Meanwhile, a recent Seventh Circuit decision took a different
approach. In Hughes v. Kore of Indiana Enterprise, Inc., plainitff in the case
alleges that two of the defendant’s ATMs lacked a statutorily required notice
about fees. The court recognized
the importance of class actions when the potential maximum recoveries by of class
members are small and identity of every class members cannot be ascertained
for sure.
In Hughes, as in Carrera, the class members' names and
addresses were unknown, so individual notice would not be possible. The court
stated that posted notices about the lawsuit on the two the ATMs, a notice in
the local newspaper, and a website would be adequate to inform the class and
identify class members. The court noted that many class members would not see
the notices, and therefore not know of their right to opt out of the class, but
that concern was not a barrier to class certification because no class member
"has a damages claim large enough to induce him to opt out and bring an
individual suit for damages."
Reversing a district court order denying class certification,
Judge Posner, writing for the 3-judge panel, noted that "a class
action, like litigation in general, has a deterrent as well as a compensatory
objective."
Although the two cases on the surface are discussing different aspects of class certification: in one ascertainability, and in the other, notice, the underlying issues are very much related and the courts' perspectives are strikingly different. The Hughes case now returns to the district court for
further proceedings, while the plaintiffs in Carrera have indicated that they
plan to file petition for rehearing by the appellate court.
