A little over a year ago we wrote to discuss the FTC’s Order against Aaron’s, one of the country’s largest rent-to-own (“RTO”) stores, charging that its franchisees were spying on its customers. Well, the inevitable follow-on class actions were filed and recently, in Byrd v. Aaron’s Inc., — F.3d –, 2015 U.S. App. LEXIS 6190 (3d Cir. Apr. 16, 2015), the Third Circuit clarified the analysis for the ascertainability requirement for class actions. While perhaps not as salacious a topic as the conduct underlying the actions themselves, the opinion could have important repercussions for antitrust and consumer class actions generally.
The named Plaintiffs leased a laptop computer from Aspen Way, an Aaron’s Inc. franchise. (Aspen Way and Aaron’s, as well as other Aaron’s franchises, were named defendants in the action.) Plaintiffs subsequently learned that Aspen Way secretly accessed their laptop 347 times through a spyware program, obtaining significant personal information including screenshots, credit and debit card numbers, personally identifiable information, bank account information, private communications with attorneys and doctors, and intimate conversations. Plaintiffs asserted a claim against defendants under the Electronic Communications Privacy Act (ECPA) and moved to certify the class as “All persons who leased and/or purchased one or more computers from Aaron’s Inc. [or franchisee], and their household members, on whose computers [the spyware] was installed and activated without such person’s consent on or after January 1, 2007.”
The district court, adopting a recommendation of a magistrate judge, denied class certification on ascertainability grounds, finding that the proposed class definitions were under-inclusive (because it did not include all individuals whose information was secretly gathered), over-inclusive (because not every proposed class member could state an ECPA claim), and vague (because “household members” was undefined). The district court did not analyze the other class action requirements under Rule 23(b)(3).
Clarifying the ascertainability requirement
Rather stridently, the Third Circuit took the opportunity to “dispel any confusion” as to the proper analysis of ascertainability. The Court noted that ascertainability is an implied requirement of Rule 23 and required the class proponent to prove 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.’” Id. at *15. Although a class proponent need only show that class members can be identified to satisfy ascertainability, it must provide evidentiary support that a proposed method will actually ascertain the class members. Id. at *18. As it did just a couple of years ago, it confirmed that a mere “say-so” affidavit will not be enough to demonstrate ascertainability. Id. at *17-18.
Against this backdrop, the Third Circuit found four reasons to reverse the district court’s denial of class certification on ascertainability grounds.
- The district court conflated ascertainability with class definition. The Third Circuit was outright miffed that the district court cited the above ascertainability test as the applicable standard for class definition. The Court took great pains to make clear that the analysis for what constitutes a proper class definition and what satisfies Rule 23’s implicit ascertainability requirement are distinct, though admittedly (albeit reluctantly) related. The Third Circuit also faulted the district court for considering whether the named Plaintiffs were members of the proposed classes under the ascertainability issue, rather than under the appropriate Rule 23(b)(3) requirements. Id. at *23.
- Under-inclusiveness is not a valid inquiry for ascertainability. The district court held that the proposed class definitions were “under-inclusive” and not ascertainable because they did not include all individuals whose information was surreptitiously gathered by defendants. The Court held that under-inclusivity of a class definition is not a valid consideration for ascertainability, as “[t]he ascertainability standard is neither designed nor intended to force all potential plaintiffs who may have been harmed in different ways by a particular defendant to be included in the class[.]” Id. at *27. Rather, “[i]ndividuals who are injured by a defendant but are excluded from a class are simply not bound by the outcome of that particular action.” Id. at *26.
- The district court conflated predominance with ascertainability. The district court held that the proposed classes were overbroad because not every lessee/owner of a computer on which the spyware was activated will state a claim under the ECPA. The Third Circuit held that this issue pertained to predominance and/or class definition. Ascertainability was satisfied because the proposed class members of “lessees” and “owners” were readily identifiable from Aaron’s own records. Id. at *27-31.
- “Household members” of computer owners/lessees were ascertainable. The district court held that “household members” was vague and rendered the proposed classes unascertainable. The Third Circuit disagreed, finding that “household members” in the context of the case was “easily defined” and that Plaintiffs proposed “various ways” to define and verify the identity of household members using personal and public records. Id. at *32-33.
So what do we take away from Byrd? First, ascertainability is a separate inquiry from other Rule 23(b)(3) requirements—such as numerosity, typicality, predominance, and adequacy of representation. As the Third Circuit said, “[t]he ascertainability inquiry is narrow. If defendants intend to challenge ascertainability, they must be exacting in their analysis and not infuse the ascertainability inquiry with other class-certification requirements.” Id. at *21. Failing to distinguish between ascertainability and other Rule 23(b)(3) requirements will likely result in error.
Second, the Third Circuit is sticking to their guns as they appear to require a stricter demonstration for ascertainability than other circuits. All circuits require that the class is defined with reference to “objective criteria,” but the Third Circuit adds an additional requirement that there be a reliable and feasible mechanism to determine whether putative class members fall within the class definition.
Although the appellate court sided with the plaintiffs in the case, the decision will almost certainly be hailed by class action defense lawyers and derided by the plaintiffs’ bar. For better or worse, as Judge Rendell noted in her concurrence, the additional ascertainability requirement renders class certification more difficult for small-value consumer class actions, where consumers are unlikely to retain evidence (like receipts) substantiating their membership in a class. At some point, no doubt, the Supreme Court will weigh and decide whether the Third Circuit approach is correct.
Until then, stay tuned….