Posts belonging to Category Certification Rulings

In Re Yahoo Mail Litig.: Court Rejects Defendant’s Catch-22 Argument re Article III Standing

On May 26, 2015, Judge Lucy H. Koh of the Northern District of California certified both nationwide and California state classes of individual non-Yahoo mail users in a putative class action against Yahoo for its non-consensual collection, or mining, of data from non-user emails to Yahoo Mail subscribers. See In Re Yahoo Mail Litig., No. 13-4980 (N.D. Cal. May 26, 2015) (Order Granting in Part and Denying in Part Motion for Class Certification, available here).

In In re Yahoo Mail Litig., the class claims were limited to injunctive and declaratory relief, and the plaintiffs strategically did not seek statutory damages. Judge Koh certified a nationwide class under the Stored Communications Act (“SCA”) and a California-only class under the California Invasion of Privacy Act (“CIPA”). The certification of the two classes involved the intersection of three current, hot-button issues: (1) electronic online data mining; (2) Article III standing; and (3) ascertainability. In particular, Judge Koh’s straightforward, commonsense analysis of Article III standing is instructive for its clarity and reasoning.

Whether a plaintiff has Article III standing to pursue injunctive relief after gaining knowledge of a defendant’s wrongdoing was a pivotal question in this case. Yahoo argued that the plaintiffs’ continued email interaction with Yahoo subscribers after they learned of Yahoo’s data collection practices forecloses their standing to pursue injunctive relief, since these continued interactions constituted consent to Yahoo’s policies. As a result, the class members would be unable to show a likelihood of being injured in the future. See Order at 10. However, the court simply rejected this argument. Id.

According to Yahoo, the plaintiffs would be required to cease emailing Yahoo users in order to preserve their claims and to avoid consenting to Yahoo’s data mining, yet they would need to continue communicating with Yahoo users’ accounts in order to demonstrate a threat of future injury. Judge Koh found that, because a showing of a likelihood of future injury is required to pursue injunctive relief, Yahoo’s rationale “would put Plaintiffs in a catch-22 that would essentially preclude injunctive relief altogether.” Id. at 14.

While other courts have landed on the less-desirable end of the issue, Judge Koh’s ruling signals that Yahoo’s interpretation of Article III standing should be rejected for being overly narrow in the consumer protection context, which is welcome news for California consumers. See id. at 12.

Authored by: 
Tarek Zohdy, Associate

Ascertaining Ascertainability in the Third Circuit

A recent opinion issued by the Third Circuit Court of Appeals is a must-read for any class action practitioner who has been flummoxed by the Court’s approach to ascertainability under Rule 23. Byrd, et al. v. Aaron’s Inc., et al., No. 14-3050 (3d Cir. April 16, 2015) (slip op. available here). The Third Circuit sought to “dispel any confusion” regarding the ascertainability requirement. Slip op. at 20. This confusion was self-inflicted by a quartet of Third Circuit opinions that courts interpreted to mean that retail records and class member affidavits are not sufficient to establish that a class is ascertainable. As one court noted, in commenting on a key Third Circuit case, “[i]t appears that pursuant to [Carrera v. Bayer Corp., 727 F.3d 300, 306 (3d Cir. 2013)] in any case where the consumer does not have a verifiable record of its purchase, such as a receipt, and the manufacturer or seller does not keep a record of buyers, Carerra [sic] prohibits certification of the class.” McCrary v. Elations Co., LLC, No. 13-cv-242, 2014 U.S. Dist. LEXIS 8443, at * 24 (C.D. Cal. Jan. 13, 2014).

In Byrd, the Third Circuit attempted to clarify the ascertainability standard, which the court acknowledged had been invoked by defendants in class actions “with increasing frequency in order to defeat class certification.” Slip op. at 20. The court stated that ascertainability “only requires the plaintiff to show that class members can be identified. Accordingly, there is no records requirement.” Id. at 25. However, a plaintiff still has to propose a method of ascertaining a class that has some evidentiary support that the method will be successful. Id. The court cautioned against conflating ascertainability with other class action requirements, such as numerosity and predominance, stressing that certain inquiries regarding certification are more properly analyzed under those specific Rule 23 requirements and not under the ascertainability inquiry.

The refreshingly candid concurring opinion by Judge Rendell calls out the Third Circuit for further muddling the issue and is much more interesting from a plaintiff/consumer perspective. Judge Rendell begins by noting that “[the Third Circuit’s] heightened ascertainability requirement defies clarification,” and “the lengths to which the majority goes in its attempt to clarify what our requirement of ascertainability means, and to explain how this implicit requirement fits in the class certification calculus, indicate that the time has come to do away with this newly created aspect of Rule 23 in the Third Circuit.” Slip op., Rendell concurring op. at 1.

In Judge Rendell’s view, the Third Circuit still has “precluded class certification unless there can be objective proof—beyond mere affidavits—that someone is actually a class member.” Id. at 4. That approach is wrong, according to Judge Rendell, and for compelling reasons:

In most low-value consumer class actions, prospective class members are unlikely to have documentary proof of purchase, because very few people keep receipts from drug stores or grocery stores. This should not be the reason to deny certification of a class. . . . We have effectively thwarted small-value consumer class actions by defining ascertainability in such a way that consumers will necessarily fail to satisfy for lack of adequate substantiation. Consumers now need to keep a receipt or can, bottle, tube, or wrapper of the offending consumer items in order to succeed in bringing a class action.

Id. at 5-7.  He notes that in other Circuits, such as the Seventh and Ninth Circuits, some courts have certified small-value consumer cases and have not imposed the Third Circuit’s heightened proof requirement for ascertainability. Id.

The concurrence also rejects the notion that defendants’ due process rights will be abrogated by a standard that seeks to compensate at least some of the injured class members, stating that the odds that someone would sign a false affidavit, under penalty of perjury, that he or she purchased aspirin for the sake of receiving a “windfall” of $1.59 are “far-fetched at best.” Id. at 10. Further, Judge Rendell opines that the Third Circuit emphasized the wrong policy goal with this “clarified” standard, noting that “by focusing on making absolutely certain that compensation is distributed only to those individuals who were actually harmed, [the ascertainability doctrine] has ignored an equally important policy objective of class actions: deterring and punishing corporate wrongdoing. . . . In small-claims class actions like Carrera, the real choice for courts is between compensating a few of the injured, on the one hand, versus compensating none while allowing corporate malfeasance to go unchecked, on the other.” Id. at 10-12. Judge Rendell is adamant that rigorously applying the ascertainability requirement “translates into impunity for corporate defendants who have harmed large numbers of consumers in relatively modest increments. Without the class action mechanism, corporations selling small-value items for which it is unlikely that consumers would keep receipts are free to engage in false advertising, overcharging, and a variety of other wrongs without consequence.” Id. at 10-11.

He concludes that the Third Circuit’s approach to ascertainability “disserves the public,” writing,“[w]hile a rigorous insistence on a proof-of-purchase requirement . . . keeps damages from the uninjured, it does an equally effective job of keeping damages from the truly injured as well, and ‘it does so with brutal efficiency.’. . . [I]t is time to retreat from our heightened ascertainability requirement . . . .” Id. at 12-13. Judge Rendell’s conclusion is worth contemplating and should inform every court that is inclined to invoke ascertainability in order to deny class certification.

Authored by: 
Jordan Lurie, Of Counsel

2nd Cir. Rejects Extreme Interpretation of Comcast

Courts have long held that individual and varying damages calculations for putative class members does not necessarily preclude class certification. However, a shadow of doubt was cast over this well-settled principle by the United States Supreme Court’s decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). In Comcast, the Supreme Court reversed the district court and Third Circuit Court of Appeals’ certification orders because it found that the plaintiff’s expert testimony was insufficient to establish classwide damages. Predictably, defense counsel have cited Comcast to argue that individual damages issues preclude certification. If adopted, this rationale would effectively end class actions as we know them, given that most class actions involve varying individual damages.

Recently, the influential Court of Appeals for the Second Circuit weighed in on the scope of Comcast and whether it overruled the law of its Circuit, holding that class certification cannot be denied merely because damages have to be ascertained on an individual basis. Roach v. T.L. Cannon Corp., No. 13-3070-cv (2d Cir. Feb. 10, 2015) (slip op. available here). In Roach, the plaintiff alleged that T.L. Cannon, an Applebee’s restaurant franchisee, had a policy of not paying hourly employees an extra hour of pay when working a ten-hour work day as was required at the time by New York law (the “spread-of-hours” claim) and that the defendant required its managers to subtract pay for required rest breaks that the employees did not take (the rest break claim). The magistrate judge recommended that the spread-of-hours claim be certified, finding the common question of whether the company had a policy of depriving employees of an extra hour of pay predominated over individual issues, but ultimately denied certification of the rest break claim because the class representatives were inadequate. The district court, without considering whether common issues existed, denied certification of both claims on the sole basis that the presence of individualized damages precluded certification under Comcast. Slip op. at 9.

The Second Circuit disagreed with the lower court, holding that the court had misinterpreted Comcast. Id. at 26. According to the Second Circuit, Comcast did not hold that a class cannot be certified under Rule 23(b)(3) simply because damages cannot be measured on a classwide basis. Id. at 19. Rather, Comcast’s more narrow ruling was “that a model for determining classwide damages relied upon to certify a class under Rule 23(b)(3) must actually measure damages that result from the class’s asserted theory of injury.” Id. at 20. Although Comcast reiterated that the damages question should be considered at the certification stage, the fact that damages may have to be ascertained on an individual basis is only a factor to consider when determining whether common issues outweigh individual issues. Id at 22. The Roach court noted that its ruling was consistent with the five other Circuits that had applied Comcast, including the Ninth Circuit’s decision in Leyva v. Medline Indus. Inc., 716 F.3d 510 (9th Cir. 2013). The court then vacated the order denying class certification and remanded the case.

Authored by:
Robert Drexler, Senior Counsel

CA Ct. of Appeal Reverses Denial of Class Cert in Song-Beverly ZIP Code Case

In an unpublished opinion issued last week, the California Court of Appeal found that a lower court incorrectly denied class certification in a proposed class action involving the collection of consumers’ ZIP codes at Party America retail stores. Aguirre v. Amscan Holdings, Inc., No. C073059 (Cal. Ct. App. Feb. 11, 2015) (slip op. available here). The plaintiff alleged that Amscan, d/b/a Party America, collected and recorded customers’ ZIP codes at the point of sale, in violation of the Song-Beverly Credit Card Act.

The trial court examined the criteria for class certification and denied the plaintiff’s motion based on lack of ascertainability, because the plaintiff could not “clearly identify, locate and notify class members through a reasonable expenditure of time and money.” Slip op. at 13. However, this is a much stricter definition of ascertainability than is generally imposed on class action plaintiffs, and the appellate court categorically rejected the trial court’s conclusion, stating that “the representative plaintiff need not identify, much less locate, individual class members to establish the existence of an ascertainable class.” Slip op. at 11-12 (relying on Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 706).

The Amscan court found that an ascertainable class exists, since the class definition “describes a set of common characteristics sufficient to allow a member of that group to identify himself or herself as having a right to recover based on the description.” Slip op. at 19 (citing Bartold v. Glendale Federal Bank (2000) 81 Cal.App.4th 816, 828). The case was remanded back to the trial court with instructions to reevaluate their class certification determination in light of the appellate court’s finding of an ascertainable class.