Ascertainability In Class Actions: Continuing Developments

May 20, 2018

Third Circuit

In a series of decisions beginning in 2012, the Third Circuit has held that a plaintiff seeking class treatment under Rule 23(b)(3)[1] must demonstrate that the class is “currently and readily ascertainable based on objective criteria.”[2] In practice, this means that a class cannot be certified if class members (a) are impossible to identify without extensive and individualized fact-finding or mini-trials, or (b) cannot be identified via a reliable and administratively feasible method, one that permits a defendant to test the reliability of the evidence submitted to prove class membership.[3] The court has held that defendants possess the right to challenge such evidence as a matter of due process.[4]

Applying this “ascertainability” requirement in consumer protection cases, the court has rejected class treatment where class membership is predicated solely upon potentially self-serving affidavits from putative class members attesting that they purchased the defendant’s products. The court has also rejected the use of customer membership cards or online sales records absent evidence that they are a reliable method for establishing class member purchases.[5]

Noting “apparent confusion” over what it described as “a relatively simple requirement,” in 2015 the Third Circuit sought to clarify and outline the “precise boundaries” of its previous rulings on ascertainability.[6] First, ascertainability does not mean that a plaintiff must be able to identify each and every class member when they move for certification. Instead, a plaintiff need only show that class members can be identified when necessary.[7] Second, class member affidavits attesting to purchases can, when allied with other evidence such as retailer records, be used to prove class membership, so long as the process is reliable.[8] Third, the fact that a class definition is “underinclusive” (i.e., does not include all persons allegedly harmed by the defendant’s actions) is not a per se bar to ascertainability (although it may be relevant in determining whether the evidence presented to establish class membership is sufficient). Nor is the fact that the class definition may be “overbroad” (i.e., includes persons not injured by the defendant).[9] Finally, the need to review individual records or files to identify class members is not, by itself, reason to deny certification. If it were, the court explained, no class could ever be certified under Rule 23(b)(3).[10]

The recent decision in City-Select Auto Sales Inc. v. BMW Bank of N. Am. Inc. provides further guidance on what evidence will and will not be considered sufficient to meet the ascertainability requirement.

In City-Select, a New Jersey automobile dealership brought a putative class action against the consumer financing division of BMW and its contractor, based on junk faxes allegedly sent in violation of the Telephone Consumer Protection Act.[11]

To send each fax, the contractor’s employees had generated a list of recipients from the contractor’s customer database. After generating the recipient list (a subset of the names in the customer database), the employee uploaded the list and a fax advertisement for BMW was then broadcast to each recipient. However, the contractor did not maintain a list of the dealerships to which the BMW faxes were sent.[12]

The plaintiff City-Select sought to represent a putative class of dealerships listed in the contractor’s customer database that received unsolicited BMW faxes. During class certification discovery, it sought to compel production of the contractor’s database. This motion was denied.[13]

The district court subsequently denied the plaintiff’s class certification motion on ascertainability grounds, finding that there was no reliable and administratively feasible means of determining whether putative class members fell within the class definition. The district court concluded that “even though Plaintiff may be able to identify the potential universe of fax recipients [via the database], there [was] no objective way of determining which customers were actually sent the BMW fax.”[14]

City Select appealed. In August of 2017, the Third Circuit vacated the district court ruling and remanded the case for further fact-finding.[15]

The court began its opinion by summarizing the pre-existing law on ascertainability in the Third Circuit.

A Rule 23(b)(3) class must … be currently and readily ascertainable based on objective criteria. To satisfy this standard, plaintiff must show 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. Plaintiff has the burden of making this showing by a preponderance of the evidence, and the district court must undertake a rigorous analysis of the evidence to determine if the standard is met. However, plaintiff need not be able to identify all class members at class certification – instead, a plaintiff need only show that class members can be identified.[16]

It then restated the “three principal rationales” for the ascertainability requirement:

  • “Ascertainability and a clear class definition allow potential class members to identify themselves for purposes of opting out of a class.”
  • “It ensures that a defendant’s rights are protected by the class action mechanism” and that “those persons who will be bound by the final judgment are clearly identifiable.
  • “It ensures that the parties can identify class members in a manner consistent with the efficiencies of a class action.”[17]

Turning to the district court’s decision, the Third Circuit explained that “[its] ascertainability precedents do not categorically preclude affidavits from potential class members, in combination with the [contractor’s] database, from satisfying the ascertainability standard.”[18]

First, the court distinguished its previous decisions on the ground that, unlike the consumer classes in those cases, where the plaintiffs had not tied the class definitions to the available records, the contractor database in this case allowed for notice directly to potential class members.[19] It also limited the universe of potential claimants to those identified in the database. Any fax recipients that were not included in the database would not be bound by any judgment. Thus the first two principal policy rationales for the ascertainability standard – facilitating opt-outs and identifying persons bound by the final judgment – were not implicated.[20]

Second, with respect to the district court’s finding that the contractor database was over-inclusive because there was no evidence that the BMW fax was sent to every customer who had a fax number in the database, the Third Circuit held that class member affidavits could help the plaintiffs overcome that problem.

Plaintiff need not, at the class certification stage, demonstrate that a single record, or set of records, conclusively establishes class membership. Rule 23 does not require an objective way of determining class membership at the certification stage, but only that there be “objective criteria” for class membership and a “reliable and administratively feasible” means of determining whether these criteria are met. Affidavits from potential class members, standing alone, without “records to identify class members or a method to weed out unreliable affidavits,” will not constitute a reliable and administratively feasible means of determining class membership. However … our other cases do not imply “no level of inquiry as to the identity of class members can ever be undertaken.” Affidavits, in combination with records or other reliable and administratively feasible means, can meet the ascertainability standard.[21]

In this case, the contractor’s database defined a limited set of potential claimants. The only factual inquiry required to determine class membership was whether a particular dealership in the database received the BMW fax on one of the dates in question. Answering this factual question through affidavits or other available records would not necessarily require individualized fact-finding that would be “administratively infeasible.” In a footnote that may well become a major focus of future debate, the court stated that:

Even if it is true that the BMW fax was not sent to every customer who had a fax number in the database during the relevant time period, the class could still be certified, so long as there is a method for determining which customers did receive such faxes, which could be by affidavit.[22]

The amount of overinclusiveness, if any, of the proposed records is a critical consideration.[23] “While a high degree of over-inclusiveness could prevent certification, any degree of over-inclusiveness will not do so.”[24]

Because the database was not produced during discovery, the plaintiff was denied the opportunity to demonstrate the role that it could play in providing a reliable, administratively feasible method of ascertaining class membership.[25] The Third Circuit therefore vacated the denial of class certification and remanded with instructions that the database be produced.


The decision reaffirms the boundaries on the ascertainability doctrine that the court first sought to establish in 2015.

The mere fact that class definitions may be overinclusive or underinclusive does not provide a basis for an ascertainability objection, although it may affect the sufficiency of the evidence proposed as a basis for determining class membership.

The decision reaffirms the court’s previous holdings that affidavits, standing alone, cannot provide a sufficient basis for determining class membership.

It holds that affidavits, in combination with some other reliable source, may provide a sufficient basis upon which to find ascertainability.

While the decision seeks to provide further clarity in this area, it remains unclear just how significant a role affidavits can play in meeting the ascertainability test. If the court is suggesting that affidavits can be used only to corroborate information contained in what the court considers a reliable source for identifying class members (e.g., a customer list or database), then the question arises as to what purpose the affidavits really serve. Alternatively, if affidavits are used for a more substantive purpose, for example, to weed out members of an overinclusive class, then their role is not merely one of corroboration but as the primary source of proof itself. In such circumstances, it is the affidavit that determines whether or not a person qualifies as a class member. And in that situation, two questions arise: (1) is this consistent with the principle that affidavits, by themselves, cannot be used to establish class membership, and (2) does using affidavits in this role run afoul of defendants’ due process rights?


The City-Select opinion was authored by Judge Scirica. Judge Fuentes wrote a concurring opinion in which he advocated for the abandonment of the ascertainability rule. Judge Fuentes is not alone in his opinion that the Third Circuit’s ascertainability jurisprudence should be abandoned. Several of his brethren have authored or joined dissenting or concurring opinions espousing the same view.[26]

Federal Courts of Appeals in other Circuits are likewise divided on the Third Circuit approach. In the last year, the Second and Ninth Circuits have joined the Sixth, Seventh and Eighth Circuits in rejecting what they view as a heightened standard for ascertainability that is incompatible with Rule 23.[27] The Fourth Circuit and the Eleventh Circuit (albeit in an unpublished opinion) stand with the Third Circuit in imposing an ascertainability requirement.[28]


With a clear and well-developed Circuit split on such a threshold issue, one would expect the U.S. Supreme Court to step in and resolve the conflict. However, the Court has shown no such appetite to date. In the past two years, it has denied three certiorari petitions in which the issue was presented.[29] A fourth petition is currently pending before the Supreme Court, but is stayed pending a possible settlement.[30]


In the state courts, the governing precedent remains the decision of the Appellate Division in Daniels v. Hollister,[31] which held that the ascertainability requirement has no place in consumer cases, and expressed “misgivings” about its use in any other class action as well.[32] There were no new developments in the state law context over the past year.





[1] In Shelton v. Bledsoe, 775 F.3d 554 (3d Cir. 2015), the court held that the ascertainability requirement does not apply in putative class actions brought under Rule 23(b)(2). Id. at 561.

[2] See, e.g., Marcus v. BMW of N. Am. LLC, 687 F.3d 583, 593 (3d Cir. 2012);

Hayes v. Wal-Mart Stores, Inc., 725 F.3d 349, 354-56 (3d Cir. 2013).

[3] Id. at 593-94. “Administrative feasibility” means that “identifying class members is a manageable process that does not require much, if any, individual factual inquiry.” Carrera v. Bayer Corp., 727 F.3d 300, 307-08 (3d Cir. 2013).

[4] See, e.g., Marcus, 687 F.3d at 594 (“Forcing BMW and Bridgestone to accept as true absent persons’ declarations that they are members of the class, without further indicia of reliability, would have serious due process implications”); Carrera, 727 F.3d at 307 (“A defendant has a … due process right to challenge the proof used to demonstrate class membership …”).

[5] See, e.g., Carrera, 727 F.3d at 308-10.

[6] Byrd v. Aaron’s Inc., 784 F.3d 154, 161 (3d Cir. 2015).

[7] Id. at 162.

[8] Id. at 164.

[9] Id. at 166-68.

[10] Id. at 171. The Byrd court did not address the Third Circuit’s previous holding that “administrative feasibility” means that “identifying class members is a manageable process that does not require much, if any, individual factual inquiry.” Carrera, 727 F.3d at 307-08.

[11] City Select Auto Sales Inc. v. BMW Bank of N. Am. Inc., 867 F.3d 434, 436 (3d Cir. 2017).

[12] Id. at 437.

[13] Id.

[14] Id. at 438.

[15] Id.

[16] Id. at 439.

[17] Id.

[18] Id. at 440.

[19] Id. at 441.

[20] Id.

[21] Id.

[22] Id. at 443 n.4.

[23] Id. at 443.

[24] Id. at 443 n.4.

[25] Id. at 443.

[26] See, e.g., Carrera v. Bayer Corp., 2014 WL 3887938, at *1 (3d Cir. May 2, 2014) (Ambro, J., dissenting from denial of rehearing en banc); Byrd, 784 F.3d at 72 (Rendell, J., concurring).

[27] See In re Petrobras Sec., 862 F.3d 250, 265 (2d Cir. 2017) (“we decline to adopt a heightened ascertainability theory … [which] would upset the careful balance of competing interests codified in the explicit requirements of Rule 23”); Briseno v. ConAgra Foods, Inc., 844 F.3d 1121, 1125 (9th Cir. 2017) (“A separate administrative feasibility prerequisite to class certification is not compatible with the language of Rule 23”); see also Rikos v. Procter & Gamble Co., 799 F.3d 497, 525 (6th Cir. 2015); Mullins v. Direct Digital, LLC, 795 F.3d 654, 658 (7th Cir. 2015).

[28] EQT Prod. Co. v. Adair, 764 F.3d 347, 358 (4th Cir. 2014); Karhu v. Vital Pharm., Inc., 621 F. App’x 945, 948 (11th Cir. 2015).

[29] ConAgra Brands, Inc. v. Briseno, 138 S. Ct. 313 (2017); Procter & Gamble Co. v. Rikos, 136 S. Ct. 1493 (2016); Direct Digital, LLC v. Mullins, 136 S. Ct. 1161 (2016).

[30] Petroleo Brasileiro S.A. v. Univ. Superannuation Scheme Ltd., No. 17-664 (U.S., petition for cert. filed Nov. 1, 2017, stayed Jan. 16, 2018).

[31] 440 N.J. Super. 359 (App. Div. 2014).

[32] Id. at 368-69.

No Harm, No Civil Penalty, and No More “No Injury” Class Actions: New Jersey Supreme Court Issues Landmark TCCWNA Decision

April 18, 2018

April 16, 2018

In one of the most eagerly-anticipated consumer protection decisions in the last decade, the New Jersey Supreme Court has held that a claim for civil penalties under the Truth in Consumer Contract, Warranty and Notice Act, N.J.S.A. 56:12-14 et seq. (“TCCWNA”), requires a plaintiff to demonstrate some form of injury, although the requisite injury need not be a traditional injury compensable by money damages.

This decision will be welcomed by defendants, particularly in the class action context, where plaintiffs and some courts have cited the absence of causation and injury requirements in TCCWNA as a major reason for granting class treatment in cases seeking only civil penalties.


Enacted in 1982, TCCWNA was intended to address the increasingly prevalent problem of provisions in consumer contracts, warranties, notices and signs that violated the clearly established rights of consumers.[1] Even though these provisions were invalid or unenforceable, the Legislature was concerned that their very inclusion in a contract, warranty, notice or sign deceived consumers into thinking that they were valid and enforceable, and thereby prevented the consumer from enforcing his or her legal rights.[2]

The TCCWNA statute itself did not actually establish any new rights for consumers.[3] Instead, it required sellers to acknowledge and respect consumer rights that were clearly established by other laws, and provided remedies against sellers who posted or inserted contrary provisions.”[4] Those remedies were set forth in N.J.S.A. 56:12-17:

“Any person who violates the provisions of this act shall be liable to the aggrieved consumer for a civil penalty of not less than $100.00 or for actual damages, or both at the election of the consumer, together with reasonable attorney’s fees and court costs …”

A Conflicted Legal Landscape

TCCWNA does not define the term “aggrieved consumer.” For several years, courts have reached conflicting conclusions on whether a plaintiff has standing to seek civil penalties (rather than actual damages) under the statute if they have not suffered injury or harm. Some decisions have been interpreted to suggest that there is no such requirement and a statutory violation by itself is sufficient.[5] Other courts have held that injury or harm in the traditional sense is required. [6] Yet other courts have ploughed a third, middle road, holding that something short of actual damage or injury – an “adverse consequence” or “negative effect” – is needed to trigger the statute’s civil penalty provision.[7]

Spade and Wenger: The Background

New Jersey’s Furniture Delivery Regulations address the content of sales contracts and orders for the delivery of household furniture.[8] The defendants in Spade and Wenger delivered the furniture on time and without incident, but their contracts failed to include the mandatory language.[9] The plaintiffs filed putative class actions alleging violations of TCCWNA.[10] Rejecting their claims, the federal district court held while the contract language did indeed violate the regulations, the plaintiffs were not “aggrieved consumers,” which the court defined as someone “who has suffer[ed] the effects of a violation.”[11]

After the plaintiffs appealed the decision to the Third Circuit, the federal appeals court certified two questions to the New Jersey Supreme Court under Rule 2:12A-1:[12] (1) Is a consumer who receives a contract that does not comply with the Furniture Delivery Regulations, but has not suffered any adverse consequences from the noncompliance, an “aggrieved consumer” under the TCCWNA? and (2) Does a violation of the Furniture Delivery Regulations alone constitute a violation of a clearly established right of a consumer or responsibility of the seller under the TCCWNA and thus provide a basis for relief under the TCCWNA?[13] The Supreme Court accepted these questions for review in April of last year.[14]

The Supreme Court Decision

The Supreme Court addressed the Third Circuit’s questions in reverse order and spent little time disposing of the regulations issue. Noting that “the content of contracts and other writings used in commercial transactions is typically addressed in regulations, rather than statutes,” the Court held that a TCCWNA violation may be premised on the violation of a regulation.[15] The only question is whether the regulation in question “clearly prohibited the contractual provision or other practice that is the basis for the TCCWNA claim.”[16]

Turning to the issue of injury or harm, the Court concluded first that the meaning of the term “aggrieved consumer” could be resolved by examining the plain language of the statute.[17] This rendered irrelevant the parties’ arguments focusing on the statute’s legislative history, all of which were predicated upon the assumption that the phrase “aggrieved consumer” was an ambiguous one.[18] Applying ordinary principles of statutory interpretation, the Court then highlighted the difference in language between the statute’s definition of a TCCWNA violation, which prohibits a seller from including an unlawful provision in a contract offered to “any consumer or prospective consumer,” and the remedies section, which uses what the Court described as the “more precise” term “aggrieved consumer.”[19] By using different words, the Legislature “clearly intended to differentiate between the broad category of people whom the Legislature sought to shield from offending provisions and the group of people entitled to a remedy under TCCWNA.” Next, the Court cited the well-established principle that legislative language should not be construed in a manner that renders words superfluous or meaningless. If, as the plaintiffs had argued, the phrase “aggrieved consumer” was interpreted to mean nothing more than a “consumer” to whom an illegal contract or other writing is offered, given or displayed, then the word “aggrieved” would have no meaning.[20] By contrast, the Supreme Court held that the word “aggrieved” “distinguishes consumers who have suffered harm because of a violation of [TCCWNA] from those who have merely been exposed to unlawful language in a contract or writing, to no effect.[21]

While basing its decision on the plain language of the statute, the Court noted that this holding was consistent with the meaning of the word “aggrieved” at the time the statute was passed. It cited dictionaries from the late 1970s and early 1980s that defined the word “aggrieved” in terms of injury and harm, or the diminution of pecuniary interests.[22] The plaintiffs had sought to introduce more recent definitions that defined the word more broadly, in terms of the invasion of legal rights.

Finally, the Court held that the term “harm” in this context was not to be limited to the kinds of injuries that are compensable by monetary damages.[23] As the Court explained, the meaning of the term is broader:

If, for example, a furniture seller fails to timely deliver a consumer’s furniture, and the consumer would have sought a refund had he or she not been deterred by the “no refunds” language prohibited by [the regulation], that consumer may be an “aggrieved consumer” entitled to a civil penalty under N.J.S.A. 56:12-17. If an untimely delivery and misleading “no refunds” language leave a consumer without furniture needed for a family gathering, the consumer may be an “aggrieved consumer” for purposes of N.J.S.A. 56:12-17. Proof of harm resulting from contract language prohibited by N.J.S.A. 56:12-15 may warrant a civil penalty under N.J.S.A. 56:12-17, even if the harm is not compensable by damages.[24]

Put another way, the consumer must suffer some form of “adverse consequence” in order to recover civil penalties under TCCWNA.[25]

Impact of the Decision

The most significant impact of the Spade opinion will be felt in the class action arena, which has witnessed an explosion of cases seeking civil penalties based on statutory violations that cause no injury. Some courts have certified these cases on the ground that, absent requirements of injury and causation, the only real issue is the legality of the defendant’s conduct, which is a common issue.[26] Those conclusions will have to be revisited. Defendants in such cases have a very strong argument that, absent some method of proving injury and causation on a class-wide basis, a class cannot be certified.[27]

TCCWNA was well on the way to developing a reputation as one of the most challenging statutes in the country for corporate defendants, a statute that could wreak devastating consequences upon a business, sometimes in circumstances where its transgression was relatively minor and the harm to consumers was non-existent. This decision removes that risk from the equation, while preserving TCCWNA’s intended purpose of deterring unlawful conduct and compensating consumers injured by illegal acts.



[1] Sponsors’ Statement to N.J. Assembly Bill No. 1660 (May 1, 1980).

[2] Id.

[3] Watkins v. DineEquity, Inc., 591 F. App’x 132, 134 (3d Cir. 2014).

[4] Shelton v., 214 N.J. 419, 432 (2013).

[5] See, e.g., Bosland v. Warnock Dodge, Inc., 396 N.J. Super. 267, 278 (App. Div. 2007), aff’d in part, 197 N.J. 543 (2009) (“TCCWNA establishes liability whenever a seller offers a consumer a contract, the provisions of which violate any legal right of a consumer”) (emphasis added); United Consumer Fin. Servs. Co. v. Carbo, 410 N.J. Super. 280, 306-07 (App. Div. 2009) (affirming $1.6 million judgment awarding class members civil penalties despite finding that no class member suffered traditional injury or harm).

Initially some courts went even further, holding that a plaintiff need not even enter into a transaction with the defendant, so long as the plaintiff was exposed to a TCCWNA violation. See Wenger v. Cardo Windows, Inc., 2012 WL 280254, at *8 (N.J. Super. Ct. App. Div. Feb 1, 2012) (“An actual purchase is not a prerequisite to the application of any of these laws”). The Supreme Court has since clarified that a TCCWNA plaintiff must “buy, lease, borrow or bail … money, property or [a] service.” Shelton, 214 N.J. at 429.

[6] See, e.g., Hite v. Lush Internet Inc., 244 F. Supp. 3d 444 (D.N.J. 2017) (appeal pending) (dismissing TCCWNA claims because the plaintiff had not suffered any injury or harm); Cameron v. Monkey Joe’s Big Nut Co., 2008 WL 6084192, at *5 (N.J. Super. Ct. Law Div. Aug. 4, 2008) (plaintiff “[did] not qualify as an ‘aggrieved’ consumer … because he was not injured or even unhappy”); Walters v. Dream Cars Nat’l, LLC, 2016 WL 890783, at *6 (N.J. Super. Ct. Law Div., Mar. 7, 2016) (“the Legislature intended that TCCWNA … only punish those vendors that in fact deceived the consumer, causing harm to the consumer”).

[7] See, e.g., Friest v. Luxottica Grp. S.p.A., 2016 WL 7668453, at *9 (D.N.J. Dec. 16, 2016) (plaintiff must have “suffered the effects of a TCCWNA violation”); Russell v. Croscill Home, LLC, No. 16-1190 (Transcript) at 8-9 (D.N.J. Oct. 11, 2016) (appeal pending) (same); Wenger v. Bob’s Discount Furniture, Inc., No. 14-7707 and Spade v. Select Comfort Corp., No. 15-1826 (Transcript) at 14 (D.N.J. Feb. 29, 2016) (same).

[8] See N.J.A.C. 13:45A-5 et seq.

[9] Spade v. Select Comfort Corp., 2018 WL 1790394, at *4-5 (N.J. April 16, 2018).

[10] Id. at *5-6.

[11] Id. at *6.

[12] Pursuant to N.J. Ct. R. 2:12A-1, the Supreme Court may answer a question certified to it by the Third Circuit “if the answer may be determinative of an issue in litigation pending in the Third Circuit and there is no controlling appellate decision, constitutional provision, or statute in this State.”

[13] Spade, 2018 WL 1790394, at *3.

[14] Id. at *6.

[15] Id. at *8-9.

[16] Id. at *9.

[17] Id. at *10.

[18] As the Court noted, it relies on extrinsic evidence of legislative intent “only when the statute is ambiguous, the plain language leads to a result inconsistent with any legitimate public policy objective, or it is at odds with a general statutory scheme.” Id. at *7 (quoting Shelton, 214 N.J. at 429).

[19] Id. at *10.

[20] Id.

[21] Id. (emphasis added).

[22] Id. at *11.

[23] Id.

[24] Id.

[25] Id.

[26] See, e.g., Korrow v. Aaron’s Inc., 2013 WL 5811496, at *9 (D.N.J. July 31, 2013) (granting class certification of TCCWNA claims because “a single determination of the legality of the fees charged by Defendant will determine liability for the entire class”); Jackeline Martinez-Santiago v. Public Storage, 2015 WL 7253819, at *7 (D.N.J. Nov. 16, 2015) (“resolving the question of whether these provisions violate clearly established law would resolve the TCCWNA claims of all class members”).

[27] See, e.g., Reyes v. Netdeposit, LLC, 802 F.3d 469, 481 n.12 (3d Cir. 2015) (“predominance requires that plaintiffs show that their individual injuries are capable of proof at trial through common evidence”) (citation omitted); Muise v. GPU, Inc., 371 N.J. Super. 13, 37 (App. Div. 2004) (decertification “justified by the predominance of individual causation issues”).

Absent Class Members and Constitutional Standing:  Third Circuit Holds That Only Named Plaintiffs Need Satisfy Article III

December 21, 2015

Over forty years ago, the Supreme Court held that “if none of the named plaintiffs purporting to represent a class establishes the requisite of a case or controversy with the defendants, none may seek relief on behalf of himself or any other member of the class.”[2] The Supreme Court has yet to decide whether Article III’s “case or controversy” requirement must also be satisfied by unnamed (i.e., absent) class members as part of a class certification motion. The Third Circuit addressed this question recently in Neale v. Volvo Cars of N. Am., LLC.[3] It held that only the named plaintiffs – and not absent class members – must establish standing under Article III.[4]

In common with several other Courts of Appeal, the Third Circuit also rejected the argument that the Supreme Court’s 2013 decision in Comcast Corp. v. Behrend[5] requires that damages be susceptible to measurement on a class-wide basis for a class to be certified under Rule 23(b)(3).[6]

Despite these rulings, the appeals court vacated the district court’s class certification order, which lacked an adequate predominance analysis under Rule 23(b)(3), and failed to include a “readily discernible, clear, and complete list of the claims, issues or defenses to be treated on a class basis.”[7]

Article III

Article III of the Constitution limits the jurisdiction of federal courts to actual “cases or controversies.”[8] To satisfy Article III, a plaintiff must demonstrate “(1) an injury in fact, (2) a sufficient causal connection between the injury and the conduct complained of, and (3) a likel[ihood] that the injury will be redressed by a favorable decision.”[9] Standing must be demonstrated for each claim the plaintiff asserts against the defendant.[10]

The Third Circuit decision in Neale involved the first of these requirements, injury-in-fact. Under Article III, the requisite injury-in-fact is an “invasion of a legally protected interest” that is “particularized” and “concrete in both a qualitative and temporal sense.”[11] The injury must also be “actual or imminent, not conjectural or hypothetical.”[12] A risk of future injury may support standing if the threatened harm is “certainly impending,” or there is a “substantial risk” that the harm will occur.[13]


The plaintiffs in Neale alleged that the sunroof drainage systems in several Volvo vehicle models contained a design defect that permitted water to become entrapped within the passenger compartment floorpans, causing damage to the vehicles, including interior components, carpets, and safety-related electrical sensors and wiring. The plaintiffs further alleged that Volvo had longstanding knowledge of the defect, based on consumer complaints as well as internal Volvo communications and Technical Service Bulletins issued by Volvo in an unsuccessful attempt to address the problem.[14]

The named plaintiffs, who haled from six states, filed a class action seeking the certification of a nationwide class or, in the alternative, six state-wide classes.[15] Every one of the named plaintiffs had experienced water damage that they attributed to the sunroof defect, and all of them had expended significant sums on vehicle repairs.[16] However, the proposed class definitions were much broader, defining the putative classes in terms of individuals and entities who were “current or former owners and/or lessees of a Class Vehicle,” without regard to whether their vehicles had experienced any water damage or whether the putative class members had suffered any injury, loss or damage.[17]

The District Court’s Class Certification Decision

The trial court denied the plaintiffs’ request for the certification of a nationwide class, citing conflicts in the various state laws on consumer fraud and breach of warranty.[18] However, it granted the request for six state-wide classes, based in large part on the plaintiffs’ allegations and supporting expert opinion that the vehicles all suffered from a common defect.[19] The court rejected Volvo’s arguments that the classes as defined were improper because they included many class members who had not experienced a problem with their sunroof.[20] Citing decisions from the Sixth[21] and Ninth[22] Circuits, the trial court held that “a class need not be limited to consumers who have actually experienced the defect where the product at issue suffers from a uniform design defect.”[23]

The Third Circuit’s Decision on Appeal

A.   Article III

While the trial court discussed the alleged lack of class member injury in terms of the class definition, the arguments in the Third Circuit focused on Article III’s injury-in-fact requirement.[24]

The appeals court first noted its holding seventeen years ago, in In re Prudential Ins. Co. Am. Sales Pract. Litig. Agent Actions,[25] that unnamed members of a settlement class need not satisfy Article III.[26] The Court then cited two principles of class action law that it viewed as applying with equal force to a litigation class: (1) “the class action device treats individuals falling within a class definition as members of a group rather than as legally distinct persons,”[27] and (2) “standing must be personal to and satisfied by those who seek to invoke the power of federal courts.”[28] These two principles formed the basis for the Court’s holding that absent class members in a litigation class need not satisfy Article III’s standing requirements:

Herein lies the key: a class action is a representative action brought by a named plaintiff or plaintiffs. Named plaintiffs are the individuals who seek to invoke the court’s jurisdiction and they are held accountable for satisfying jurisdiction. Thus, a class action is permissible so long as at least one named plaintiff has standing.

                                  *        *        *

Requiring individual standing of all class members would eviscerate the representative nature of the class action. It would also fail to recognize that the certified class is treated as a legally distinct entity even though the outcome of such an action is binding on the class.[29]

The Court found further support for this conclusion in Supreme Court precedent permitting a representative action to persist despite a named plaintiff’s claim becoming moot after certification.[30] It rejected as ambiguous decisions from three other Circuits that Volvo cited as contrary authority,[31] and cited opinions from other federal appeals courts in accord with its own.[32] Instead of Article III, the Third Circuit held that issues related to absent class members’ lack of injury were more properly analyzed within the general rubric of Rule 23 and its specific requirements of typicality, adequacy and predominance.[33]

B.   Comcast v. Behrend

Turning to the predominance inquiry, the Third Circuit flatly rejected Volvo’s argument that the Supreme Court’s decision in Comcast established a bright-line rule that plaintiffs seeking class treatment under Rule 23(b)(3) “must show that “damages are susceptible of measurement across the entire class.”[34] The Comcast majority’s statement that the decision “turn[ed] on the straightforward application of class-certification principles” refuted such a proposition.[35] The Court also noted that the predominance analysis in Comcast “was specific to the antitrust claim at issue” in that case.[36] Citing other federal appeals court decisions rejecting similar arguments,[37] the Court concluded by quoting the Comcast dissenting Justices’ observation that “[r]ecognition that individual damages calculations do not preclude class certification under Rule 23(b)(3) is well nigh universal.”[38]

C.   Class Certification Reversed

Despite its rejection of Volvo’s Article III and Comcast arguments, the Third Circuit vacated the trial court’s certification order. Finding that Volvo’s discussion of the differences between claims among the separate statewide classes demonstrated that it “may have legitimate Rule 23 challenges,” the Court agreed that the trial court’s predominance analysis was insufficient.[39] It specifically rejected the district court’s reliance on an isolated statement from a recent Third Circuit decision for the proposition that “for consumer fraud claims, the predominance inquiry focuses on whether the defendant’s conduct was common to all class members, which predominates over minor individual differences between plaintiffs.”[40] The prior opinion, which involved a settlement class, “was not sufficiently analogous” to the present case, nor did it “obviate the need to evaluate the claims and evidence asserted in order to evaluate predominance for a litigation class.”[41] The trial court’s certification order was also defective because it “did not specifically identify the claims certified,” as required by Circuit precedent.[42] The Third Circuit remanded the case to the trial court so that it could “provide a complete list of the class claims, defenses and issues for each of the six statewide classes [and] rule on the predominance question in light of the claims asserted and the available evidence.”[43]

Impact on Future Cases

As the Third Circuit noted in its decision, the Article III question may be answered definitively in a recent case accepted for review by the Supreme Court.[44] Until then, the law in the Third Circuit is that absent class members need not satisfy Article III’s standing requirements. The more interesting question is how the lower courts will interpret this decision in terms of Rule 23. Specifically, will the decision cause district courts to adopt a more relaxed view of the injury requirement in terms of the predominance analysis.

It is here that the Third Circuit’s discussion of the Comcast decision presents the potential for misinterpretation. The opinions in both Comcast and Neale address the “measurement” and “calculation” of damages, which is separate and distinct from the “fact of damage” (i.e. injury). This is a critical distinction that both courts have made on multiple occasions.[45] While the need to calculate the amount of damages may not, by itself, preclude certification, the need to prove injury on an individual basis almost always does.[46]

The Neale decision also illustrates once again the pitfalls of relying on precedent involving class action settlements in the certification of litigation classes. As both the Supreme Court and the Third Circuit have recognized in past decisions, the standards applicable to each situation are different.[47]

Finally, the Third Circuit’s reversal of the class certification order is a timely reminder of the trial courts’ obligation to conduct a rigorous analysis of requests for class action treatment, and to explain in detail the reasons for their decisions. This can only serve to benefit all parties.


[1] This article first appeared in the July 27, 2015 edition of Law 360.

[2] O’Shea v. Littleton, 414 U.S. 488, 494 (1974).

[3] 2015 WL 4466919 (3d Cir. July 22, 2015).

[4] Id. at *5.

[5] 133 S. Ct. 1426 (2013).

[6] Neale, 2015 WL 4466919, at *16-17.

[7] Id. at *12-15.

[8] U.S. Const. Art. III, § 2 provides that:

The judicial power shall extend to all cases, in law and equity, arising under this Constitution, the laws of the United States, and treaties made, or which shall be made, under their authority; – to all cases affecting ambassadors, other public ministers and consuls; – to all cases of admiralty and maritime jurisdiction; – to controversies to which the United States shall be a party; – to controversies between two or more states; – between a state and citizens of another state; – between citizens of different states; – between citizens of the same state claiming lands under grants of different states, and between a state, or the citizens thereof, and foreign states, citizens or subjects.

[9] Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334, 2341 (2014) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1991)).

[10] DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006).

[11] Id. at 560 & n.1.

[12] Id. at 560 (quoting Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)).

[13] Clapper v. Amnesty Int’l USA, 133 S. Ct. 1138, 1150 n.5 (2013) (quoting Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 153 (2010)).

[14] Neale v. Volvo Cars of North Am., LLC, 2013 WL 1223354, at *1 (D.N.J. Mar. 26, 2013) (“Trial Court Opinion”).

[15] Id. at *3.

[16] Id. at *1-3.

[17] Id. at *4-5.

[18] Id. at *5-8.

[19] Id. at *8-12.

[20] Id. at *5.

[21] Daffin v. Ford Motor Co., 458 F.3d 549, 553 (6th Cir. 2006).

[22] Wolin v. Jaguar Land Rover North Am., LLC, 617 F.3d 1168, 1173 (9th Cir. 2010).

[23] Trial Court Opinion, 2013 WL 1223354, at *5.

[24] Neale, 2015 WL 4466919, at *2, *11 n.6.

[25] 148 F.3d 283 (3d Cir. 1998).

[26] See id. at 306-07 (holding that once Article III standing “is determined vis-a-vis the named parties … there remains no further separate class standing requirement in the constitutional sense”).

[27] Neale, 2015 WL 4466919, at *7. The Court quoted the Supreme Court’s statement in Sosna v. Iowa, 419 U.S. 393, 399 (1975) that the “class of unnamed persons described in the certification acquired a legal status separate from the interest asserted by the [plaintiff].” Id.

[28] Id. (quoting Allee v. Medrano, 416 U.S. 802, 828 (1974)).

[29] Id. at *7 (quotations omitted).

[30] As an example, the Court cited Sosna, where the Supreme Court held that a class action cannot be dismissed as moot if the named plaintiff had a live controversy when the suit was filed, a properly certified class action was pending, and there are members of the class whose claims are not moot. Neale, 2015 WL 4466919, at *7 (citing Sosna, 419 U.S. at 399, 402–03).

[31] Id. at *8-9. In Denney v. Deutsche Bank AG, 443 F.3d 253 (2d Cir. 2006), the Second Circuit stated that “[w]e do not require that each member of a class submit evidence of personal standing. At the same time, no class may be certified that contains members lacking Article III standing. The class must therefore be defined in such a way that anyone within it would have standing.” Id. at 263–64 (citations omitted) (emphasis added). Quoting Denney, the Eighth Circuit opined that a California law that permitted a single injured plaintiff to bring a class action on behalf of a group of uninjured individuals was “inconsistent with the doctrine of standing as applied by federal courts.” Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023, 1034 (8th Cir. 2010). Because the opinion in Avritt did not mention the Constitution expressly, the Third Circuit considered it “unclear” whether the decision rested on Article III’s standing requirement or the predominance requirement of Rule 23. It reached a similar conclusion with respect to the statement of the D.C. Circuit in In re Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d 244, 252 (D.C. Cir. 2013) that “common evidence [must] show all class members suffered some injury.” Neale, 2015 WL 4466919, at *9. The Court later observed that “many courts are in fact dealing with Article III standing questions within the confines of Rule 23, which raises serious doubts as to whether they really mean to impose Article III standing as separate and distinct analyses in these cases.” Id. at *11.

[32] See In re Nexium Antitrust Litig., 777 F.3d 9, 25, 30–31 (1st Cir. 2015) (concluding “that the presence of a de minimis number of uninjured class members is permissible at class certification” and would not defeat commonality or predominance); Mims v. Stewart Title Guar. Co., 590 F.3d 298, 308 (5th Cir. 2009) (“Class certification is not precluded simply because a class may include persons who have not been injured by the defendant’s conduct”); Kohen v. Pac. Inv. Mgmt. Co. LLC, 571 F.3d 672, 677 (7th Cir. 2009) (“a class will often include persons who have not been injured by the defendant’s conduct”); Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1020–21 (9th Cir. 2011) (“In a class action, standing is satisfied if at least one named plaintiff meets the requirements [of Article III] … Thus, we consider only whether at least one named plaintiff satisfies the standing requirements”); DG ex rel. Stricklin v. Devaughn, 594 F.3d 1188, 1198 (10th Cir. 2010) (“Rule 23’s certification requirements neither require all class members to suffer harm or threat of immediate harm nor Named Plaintiffs to prove class members have suffered such harm”).

[33] Neale, 2015 WL 4466919, at *11.

[34] Id. at *16.

[35] Id. (quoting Comcast, 133 S. Ct. at 1433).

[36] Id. Comcast held that an antitrust litigation class could not be certified because the plaintiffs’ damages model did not demonstrate the theory of antitrust impact that the district court accepted for class-action treatment. 133 S. Ct. at 1433 .

[37] Neale, 2015 WL 4466919, at *17 n.10 (citing In re Nexium Antitrust Litig., 777 F.3d at 23; Roach v. T.L. Cannon Corp., 778 F.3d 401, 402 (2d Cir. 2015); In re Whirlpool Corp. Front–Loading Washer Prods. Liab. Litig., 722 F.3d 838, 860 (6th Cir. 2013); Butler v. Sears, Roebuck and Co., 727 F.3d 796, 800-01 (7th Cir. 2013); Leyva v. Medline Indus. Inc., 716 F.3d 510, 514 (9th Cir. 2013); Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc., 725 F.3d 1213, 1220 (10th Cir. 2013)).

[38] Id. at *17 (quoting Comcast, 133 S. Ct. at 1437 (Ginsburg, J. and Breyer, J., dissenting)).

[39] Id. at *11, 15.

[40] Id. at *14 (citing Sullivan v. DB Invs., Inc., 667 F.3d 273, 297-98 (3d Cir. 2011)). The district court interpreted Sullivan as confirming that “the proper focus of the inquiry here is the Defendants’ conduct in designing and marketing the Class Vehicles which all contain defective sunroof drainage systems – not the conduct of the Plaintiffs.” Trial Court Opinion, 2013 WL 1223354, at *11. What the Sullivan Court actually said was that “the focus of the predominance inquiry is on whether the defendant’s conduct was common as to all of the class members, and whether all of the class members were harmed by the defendant’s conduct.” Sullivan, 667 F.3d at 298 (emphasis added).

[41] Neale, 2015 WL 4466919, at *14.

[42] Id. at *12 (quoting Wachtel v. Guardian Life Ins. Co. of Am., 453 F.3d 179, 184 (3d Cir. 2006)); see also Nafar v. Hollywood Tanning Sys., Inc., 339 F. App’x 216, 219 (3d Cir. 2009); Beck v. Maximus, Inc., 457 F.3d 291, 299 (3d Cir. 2006) (vacating class certification orders that failed to comply with the requirements set forth in Wachtel).

[43] Id. at *13, 15.

[44] The Supreme Court has granted the petition for certiorari in Tyson Foods, Inc. v. Bouaphakeo, 2015 WL 1278593, at *1 (U.S. June 8, 2015). The second question presented by the petition is: “Whether a class action may be certified or maintained under Rule 23(b)(3), or a collective action certified or maintained under the Fair Labor Standards Act, when the class contains hundreds of members who were not injured and have no legal right to any damages.” Neale, 2015 WL 4466919, at *3 (citation omitted). Thus the Supreme Court may answer this question during its October 2015 term.

[45] See, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n.9 (1969) (distinguishing the amount of damages from the fact of damage); In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311 (3d Cir. 2008) (“[p]roof of injury (whether or not an injury occurred at all) must be distinguished from calculation of damages (which determines the actual value of the injury)”) (quoting Newton, 259 F.3d at 188); Callahan v. A.E.V., Inc., 182 F.3d 237, 254 (3d Cir. 1999) (distinguishing between fact of damage and amount of damages); Rossi v. Standard Roofing, Inc., 156 F.3d 452, 484 (3d Cir. 1998) (same).

[46] See, e.g., In re Hydrogen Peroxide, 552 F.3d at 311 (holding that “where fact of damage cannot be established for every class member through proof common to the class, the need to establish antitrust liability for individual class members defeats Rule 23(b)(3) predominance”) (quoting Bell Atl. Corp. v. AT & T Corp., 339 F.3d 294, 302 (5th Cir. 2003)); Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 187 (3d Cir. 2001) (“Because injury determinations must be made on an individual basis … plaintiffs fail to satisfy the superiority standard …”).

[47] For example, as the Third Circuit explained in Sullivan, “[t]he proposed settlement here obviates the difficulties inherent in proving the elements of varied claims at trial … ‘the difference is key’ … courts are more inclined to find the predominance test met [in the settlement context].” 667 F.3d at 304 & n.29 (emphasis added) (citations omitted); see also Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 621 (1997) (“Confronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems … for the proposal is that there be no trial”); Carrera v. Bayer Corp., 727 F.3d 300, 311 (3d Cir. 2013) (“there are different standards for approving a settlement class than for certifying a litigation class”); Newton, 259 F.3d at 192 (“the settlement approval inquiry is far different from the certification inquiry”); In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 529 (3d Cir. 2004) (“[C]oncerns with regards to case manageability that arise with litigation classes are not present with settlement classes …”).

Class Actions in New Jersey: Appellate Division Speaks on Motions to Dismiss, Ascertainability, Negative Value Suits and Interlocutory Appeals

May 19, 2015

Years typically pass between Appellate Division opinions addressing class certification issues. Earlier this month, two such opinions were issued in the space of just five days. In Myska v. New Jersey Mfrs. Ins. Co.[1] and Daniels v. Hollister Co.,[2] the Appellate Division clarified the law on several important issues. Both opinions will be published and therefore bind New Jersey’s trial courts.[3]

Motions to Dismiss Class Action Allegations on the Pleadings

Most federal courts in New Jersey have held that a defense motion seeking the immediate dismissal of class action allegations (i.e., before discovery and a class certification motion filed by the plaintiff) is premature and therefore improper.[4] In Myska, the Appellate Division held that such a motion is appropriate in the state courts, but only where the plaintiffs’ allegations, on their face, “do not lend themselves to class certification.”[5]

Myska involved allegations that the defendant insurers improperly denied coverage for diminution in the value of automobiles involved in accidents, rather than the mere cost of repair.[6] The trial court dismissed the plaintiffs’ claims on substantive grounds, with the single exception of their claim for breach of contract. [7]  As for that claim, the trial court held that it could proceed individually but not as a class action.[8] Class treatment was unsuitable because of “the significant factual differences regarding the allegations supporting each plaintiff’s action.”[9] On appeal, the plaintiffs argued that the striking of the class allegations prior to discovery was error, based upon the improper consideration of documents not referenced in the Complaint and the drawing of improper inferences from those documents.[10]

“Flatly rejecting” the imposition of “a bright-line rule prohibiting examination of the propriety of class certification until discovery is undertaken,” the Appellate Division agreed that “the facts underpinning each plaintiff’s claims [were] dependent upon the individual insurance policy provisions, the distinct vehicle damaged and the specific calculation of damages alleged, which require[d] separate litigation of every action.”[11] While each policy had similar provisions, the facts and circumstances surrounding the claim and an insured’s compliance with the policy terms to submit claims was unique.[12] For example, one named plaintiff’s claims were not denied, but rather were not paid because he lacked sufficient proof as to the diminution in value. Another named plaintiff never actually filed a claim asserting such coverage.[13]

The appellate court also rejected the plaintiffs’ claims that the trial court improperly considered documents outside the pleadings and drew unwarranted inferences from those documents.[14] The relevant documents were all referenced, if not described in detail, in the plaintiffs’ Complaint. The inferences drawn were entirely appropriate because the documents were susceptible of only one interpretation, the one the trial court reached.[15]

Negative Value Suits

The fact that a claim has “negative value” (i.e., that the cost of litigating each claim individually outweighs the actual value of the claim) has been described by the state courts as “the most compelling rationale for finding superiority in a class action.”[16] However, courts have disagreed over what dollar figure actually constitutes a “negative value” claim.[17]

In Myska, the named plaintiffs’ claims were worth $14,399 and $17,524.[18] The Appellate Division rejected as unfounded the suggestion that the size of these losses was too small to warrant an individual lawsuit.


The ascertainability requirement – whether individuals fitting the class definition may be identified without resort to mini-trials – has been the subject of considerable controversy recently in the federal courts. In Marcus v. BMW of N. Am., LLC,[19] and then again in Carrera v. Bayer Corp.,[20] the Third Circuit held that a class action is inappropriate if (a) “class members are impossible to identify without extensive and individualized fact-finding or ‘mini-trials,’” or (b) class members cannot be identified in a reliable and administratively feasible fashion, through a method that permits a defendant to challenge the evidence. Applying these principles in consumer fraud cases, the Third Circuit reversed certification where class membership was predicated upon potentially self-serving affidavits from putative class members as to their purchases of the defendants’ products.[21] The Carrera court further rejected the use of customer membership cards or online sales records absent evidence that they were reliable methods of establishing class member purchases.[22]

Some federal district courts in other Circuits have criticized these Third Circuit decisions, positing that “if class actions could be defeated because membership was difficult to ascertain at the class certification stage, there would be no such thing as a consumer class action.”[23] In Daniels v. Hollister,[24] the Appellate Division held, rather emphatically, that “ascertainability” must play no role in considering the certification of a low-value consumer class action” in the state courts of New Jersey.[25]

Daniels involved claims that the defendant clothing retailer conducted a promotion by which customers purchasing at least $75 of merchandise were given a $25 gift card for use in its stores and on its website.[26] The plaintiff alleged that, even though the gift cards had no expiration date on their face, the defendant imposed such a date after the fact, voiding all outstanding cards on January 30, 2010. [27] Rejecting the defendant’s argument that the class was unascertainable, the Appellate Division stated first that “[New Jersey state] courts have never viewed [the state’s class action rule] as requiring that a class be ‘ascertainable’ as a condition for certification.”[28] In so holding, the court distinguished the ascertainability requirement from the requirement that a class be properly defined.[29] In answer to the question of whether New Jersey courts should adopt such a requirement in light of recent developments in the Third Circuit, the panel noted that “federal experimentation with the ascertainability doctrine seems far from over.”[30] Only a few Circuits had expressly adopted such a requirement,[31] and the law in the Third Circuit “appear[ed] quite unsettled.”[32] These factors aside, the Court noted its agreement with the dissenting judges in Carrera that the inflexible application of the ascertainability concept “serves to burden or eliminate nascent class actions without providing any societal benefit.”[33] This was particularly so in cases of negative value. The application of the doctrine was even more misguided when the difficulties encountered in identifying class members were a consequence of the defendant’s own actions.[34] In Daniels, the panel held that the defendant could have obtained the identities of the consumers to whom it issued the gift cards but failed.[35] The Third Circuit’s experiences suggested that “the doctrine is practically unworkable in application and is being exploited by defendants in unsuitable cases to evade liability.”[36] In a final salvo, the Court stated that “allowing a defendant to escape responsibility for its alleged wrongdoing by dint of its particular recordkeeping policies” – an outcome the panel described as “admittedly un-troubling to some federal courts” – was “not in harmony with … principles governing class actions.”[37]

While Daniels opinion centered on ascertainability, the defendant also argued that the identification of class members created issues of manageability. The Appellate Division gave this concern short shrift, describing it as “at most a matter of concern at the claims administration stage, not a ground for rejecting class certification.”[38] It based this conclusion in part on the fact that some class members were still in possession of the voided gift cards.   However, it also held that other class members (i.e., those who discarded the gift card because they were told that they were void) could prove their class membership “through submission of an affidavit.”[39] Significantly, the Court offered no opinion on how such a process could be undertaken consistent with the defendant’s due process rights.[40]

Interlocutory Appeal of Class Certification Rulings

Federal Rule 23 was amended in 1998 to permit discretionary appeals from class certification decisions. Such an amendment was considered unnecessary in New Jersey, which already had a provision for discretionary appeals of interlocutory orders “in the interests of justice.”[41] While there are no published statistics concerning the percentage of class certification rulings accepted on interlocutory appeal, decisions to grant appellate review are relatively frequent.

In Daniels, the Appellate Division announced for the first time the standards that will govern the grant of interlocutory appellate review going forward. The Court will ”liberally indulge” applications for leave to appeal: (1) “when a denial of class status effectively ends the case (because, for example, the named plaintiff’s claim is not of a sufficient magnitude to warrant the costs of stand-alone litigation)”; (2) “when the grant of class status raises the stakes of the litigation so substantially that the defendant likely will feel irresistible pressure to settle”; and (3) when permitting leave to appeal “will lead to a clarification of a fundamental issue of law.”[42]

Impact on Future Cases

These decisions have significant importance for putative class actions filed in New Jersey’s state courts. Myska is likely to lead to more frequent motions to dismiss class action allegations. However, as federal trial courts have observed,[43] it is the unusual case in which such motions will be granted. In fact, such motions are even less likely to succeed in the state courts, which apply more liberal standards to dismissal motions.[44] A premature motion also invites error in cases where discovery is necessary for the court to conduct the “rigorous analysis” required under N.J. Ct. R. 4:32-1.[45]

The observations of the Myska court on “negative value” lawsuits provide a welcome guidepost for future cases, although it can still be argued that the benchmark should be set lower still. Claims worth $5, $6 or $10,000 are worth pursuing individually. Indeed, such claims are pursued every day in New Jersey’s small claims courts.

Another welcome development is the promulgation in Daniels of clear standards against which applications for interlocutory appellate review of class certification decisions will be measured. These standards, modeled on federal circuit decisions interpreting Federal Rule 23(f),[46] clarify what was previously an unclear area of class certification law here in New Jersey.

Finally, the Daniels court’s ruling on ascertainability is not altogether surprising, although the somewhat sharp tone of the opinion will strike some as unfortunate. While ascertainability is not now a requirement for class certification in the state courts, an identifiable class remains a prerequisite.[47] The question of whether a class that is not ascertainable can nevertheless be identifiable is likely to provide the battlefield for the next round of class certification duels. That, and the unanswered question of what happens to the defendant’s due process right to challenge potentially self-serving affidavits used to establish class membership.[48]


[1] Myska v. N.J. Mfrs. Ins. Co., 2015 WL 21300870 (N.J. Super. Ct., App. Div., May 8, 2015).

[2] Daniels v. Hollister Co., 2014 WL 8808428 (N.J. Super. Ct., App. Div., May 13, 2015).

[3] Only published opinions are precedential. See N.J. Ct. R. 1:36-3 (“No unpublished opinion shall constitute precedent or be binding upon any court”).

[4] See, e.g., Landsman & Funk PC v. Skinder-Strauss Assoc., 640 F.3d 72, 93 (3d Cir. 2011) (class certification ruling “premature” where there had been no motion for class certification and no discovery); McGuire v. BMW of N. Am., LLC, 2014 WL 2566132, at *4 (D.N.J. June 6, 2014) (“Dismissal of class claims prior to discovery and a motion to certify the class by plaintiff is … almost uniformly disfavored”). But see, e.g., Piemonte v. Viking Range, LLC, 2015 WL 519144, at *4 (D.N.J. Feb. 9, 2015) (granting motion to dismiss class action allegations for failure to adequately plead predominance); Himmelman v. Cont’l Cas. Co., 2006 WL 2347873, at *2 (D.N.J. Aug. 11, 2006) (“[a] defendant may move to strike class action allegations prior to discovery in those rare cases where the complaint itself demonstrates that the requirements for maintaining a class action cannot be met”).

[5] Myska, 2015 WL 21300870, at *8-9.

[6] Id. at *2.

[7] Id. at *2.

[8] Id. at *5.

[9] Id. The trial judge noted, by way of illustration, that one insurer did not in fact deny the plaintiff’s claims, but rather requested additional proof to quantify the alleged loss.

[10] Id. The trial judge noted, by way of illustration, that one insurer did not in fact deny the plaintiff’s claims, but rather requested additional proof to quantify the alleged loss.

[11] Id. at *6-7, *9.

[12] Id. at *10.

[13] Id.

[14] Id. at *11.

[15] Id.

[16] Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 115 (2007).

[17] See, e.g., Clark v. Bally’s Park Place, Inc., 298 F.R.D. 188, 202 (D.N.J. 2014) (claims worth “a few thousand dollars each” not worth pursuing individually); Cima v. WellPoint Health Networks, Inc., 250 F.R.D. 374, 388 (S.D. Ill. 2008) (claims worth tens of thousands of dollars not “negative value” suits).

[18] Myska, 2015 WL 21300870, at *11.

[19] 687 F.3d 583 (3d Cir. 2012).

[20] 727 F.3d 300 (3d Cir. 2013)

[21] Marcus, 687 F.3d at 593-94; Carrera, 727 F.3d at 308-09.

[22] Carrera, 727 F.3d at 309. More recently in Hayes v. Wal-Mart Stores, Inc., 725 F.3d 349 (3d Cir. 2013), the Third Circuit vacated a district court order certifying a consumer fraud class, remanding the case for additional findings on the ascertainability issue, warning that certification would fail “if the only proof of class membership is the say-so of putative class members or if ascertaining the class requires extensive and individualized fact-finding.” Id. at 356.

[23] See, e.g., Rahman v. Mott’s LLP, 2014 WL 6815779, at *4 (N.D. Cal. Dec. 3, 2014); Astiana v. Kashi Co., 291 F.R.D. 493, 500 (S.D. Cal. 2013); see also McCrary v. Elations Co., LLC, 2014 WL 1779243, at *8 (C.D. Cal. Jan. 13, 2014) (“While this may now be the law in the Third Circuit, it is not currently the law in the Ninth Circuit”); Bezdek v. Vibram USA Inc., 2015 WL 223786, at *7 n.11 (D. Mass. Jan. 16, 2015) (“the law in the First Circuit does not dictate rejection of such a class”).

[24] 2014 WL 8808428.

[25] Id. at *1 (emphasis added).

[26] Id.

[27] Id.

[28] Id. at *3.

[29] Id. In Iliadis, the New Jersey Supreme Court held that “the proposed class may not be amorphous, vague, or indeterminate and it must be administratively feasible to determine whether a given individual is a member of the class.” 191 N.J. at 106 n.2.

[30] Id. at *4 n.4.

[31] In addition to the Third Circuit decisions in Marcus, Carrera and Hayes, the Appellate Division cited EQT Prod. Co. v. Adair, 764 F.3d 347, 358–59 (4th Cir. 2014); Little v. T–Mobile U.S.A., Inc., 691 F.3d 1302, 1304 (11th Cir. 2012); John v. Nat’l Sec. Fire & Cas. Co., 501 F.3d 443, 445 (5th Cir. 2007); In re Initial Pub. Offerings Sec. Litig., 471 F.3d 24, 30 (2d Cir. 2006). Daniels, 2014 WL 8808428 at 4 n.4.

[32] Id. at *4.

[33] Id.

[34] Id. at *5.

[35] Id. at *5.

[36] Id.

[37] Id.

[38] Id. at 6.

[39] Id.

[40] See, e.g., Marcus, 687 F.3d at 594 (“Forcing BMW and Bridgestone to accept as true absent persons’ declarations that they are members of the class, without further indicia of reliability, would have serious due process implications”); Carrera, 727 F.3d at 307 (“defendant has … due process right to challenge the proof used to demonstrate class membership as it does to challenge the elements of a plaintiff’s claim”).

[41] N.J. Court Rule 2:2–4.

[42] Daniels, 2014 WL 8808428, at *1 n.1.

[43] See, e.g., 6803 Blvd. E., LLC v. DIRECTV, Inc., 2012 WL 3133680, at *1 (D.N.J. July 31, 2012); Himmelman, 2006 WL 2347873, at *2.

[44] As the Myska court itself noted, “courts must liberally view class allegations and allow reasonable inferences to be gleaned from the complaint’s allegations and search for a possible basis for class relief so as to avoid premature dismissals. 2015 WL 21300870, at *8 (citing Lee v. Carter–Reed Co., 203 N.J. 496, 506-07, 518 (2010)).

[45] Myska, 2015 WL 21300870, at *6.

[46] The court cited the decisions of the First and Seventh Circuits in Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288 (1st Cir. 2000) and Blair v. Equifax Check Servs., Inc., 181 F.3d 832 (7th Cir. 1999). Daniels, 2014 WL 8808428, at *1 n.1.

[47] Daniels, 2014 WL 8808428, at *3. As the Iliadis court noted, “the proposed class may not be amorphous, vague, or indeterminate and it must be administratively feasible to determine whether a given individual is a member of the class.” 191 N.J. at 106 n.2.

[48] See, e.g., Goldberg v. Kelly, 397 U.S. 254, 269 (1970) (“In almost every setting where important decisions turn on questions of fact, due process requires an opportunity to confront and cross-examine adverse witnesses”); Carroll v. Cellco P’Ship, 313 N.J. Super. 488, 501 (rejecting proposed certification, noting that “defendant’s right to cross-examine each plaintiff could not be protected in such a class action”).

Arbitration Clauses and Treble Damage Waivers In Consumer Contracts: New Jersey’s Appellate Division Splits (or Rather Severs) the Baby

September 18, 2014

The past several years have witnessed the creation of an entirely new body of law devoted to the question of whether and under what circumstances a waiver of procedural and substantive rights in a consumer contract can be enforced. Read more →

Class Actions in New Jersey:  Third Circuit Rejects Certification of Yet Another Nationwide Consumer Fraud and Unjust Enrichment Class

September 15, 2014

Over the past two years, the Third Circuit Court of Appeals has proved itself an aggressive guardian of Rule 23’s class certification requirements.[1] It has also provided some much needed guidance for lower state and federal courts applying the choice of law standard for tort cases adopted relatively recently by the New Jersey Supreme Court.[2] The Third Circuit visited both issues again in Grandalski v. Quest Diagnostics,[3] affirming the district court’s denial of class treatment for consumer fraud and unjust enrichment claims asserted on behalf of a nationwide class.


Grandalski involved the billing practices of the defendant Quest Diagnostics (“Quest”), which performed medical diagnostic and clinical testing on patients at the request of treating physicians. When Quest billed the patient’s insurance company, the insurer reviewed the claim and sent Quest an Explanation of Benefits (“EOB”), which informed Quest of the amount, if any, that the patient was responsible for paying. Quest then sent the patient a bill, and, if no response was received, could turn the bill over to a collection agency. The plaintiffs alleged, inter alia, that Quest billed patients in excess of the amount stated on the EOB.[4] They asserted claims under the New Jersey Consumer Fraud Act and for unjust enrichment.[5]

The plaintiffs sought certification of a nationwide class of individuals who had paid Quest an amount in excess of that stated on the EOB.[6] However, the district court found that the requisite application of fifty different consumer fraud statutes would be unwieldy and inappropriate for class treatment at trial. With respect to the unjust enrichment claim, the court found that there were numerous explanations for overbilling that would not be wrongful or unjust, and therefore an individual inquiry would be necessary for each class member. This defeated any possible finding of predominance of common issues under Rule 23(b)(3). The district court further held that because the plaintiffs’ class definition implicitly included a requirement that each class member had suffered a wrongful loss, the proposed class was unascertainable.[7] The plaintiffs then appealed.

The Decision 

Consumer Fraud and Choice of Law

At the outset, the Court of Appeals rejected the plaintiffs’ argument that the district court’s decision on choice of law was premature. Acknowledging its statement in a 2011 case that “many courts find it inappropriate to decide choice of law issues incident to a motion for class certification,” the Court distinguished that statement on the ground that it was made with respect to a settlement class, not a litigation class like the one proposed by the plaintiffs.[8] Indeed, failure to consider the choice of law issue could be considered reversible error.[9]

Turning next to the district court’s ruling that each class member’s consumer fraud claim was governed by the law of their state of residence rather than the law of New Jersey, the Third Circuit first reaffirmed its holding last year in Maniscalco v. Brother Int’l (USA) Corp.[10] that fraud cases in which statements made by a defendant in one state are read or heard by the plaintiff in another are subject to Section 148(2) of the Restatement test rather than Section 148(1).[11] Applying Section 148(2)’s multi-factor inquiry, the appeals court found that only the third factor (the place where the defendant made the alleged misrepresentations) favored the application of New Jersey law, whereas several other factors (the place where the class members received the misrepresentations, where they paid money to Quest, and where Quest performed the medical testing) favored the application of the law of each class member’s state of residence.[12] The domicile of the plaintiffs was also more important than that of the defendant under the Restatement standard.[13] Noting that Section 148(2) must also be construed in light of the principles set forth in Section 6 of the Restatement, the Court held that those principles applied “with equal force in favor of [applying] class members’ home states laws.”[14]

The Court turned next to the plaintiffs’ argument that any problems created by choice of law could be addressed through “grouping” the different states’ laws into two categories (i.e., the states that proscribe “unfair of deceptive conduct” similar to the FTC Act, and those that prohibit false or misleading conduct).[15] Rejecting this contention, the Third Circuit again distinguished cases involving class action settlements.[16] Instead, it cited cases holding that plaintiffs “face a significant burden to demonstrate that grouping is a workable solution.”[17] The Grandalski plaintiffs’ argument consisted of a citation to one district court case purporting to follow a grouping procedure, and an exhibit setting forth the National Consumer Law Center’s 2009 analysis of various state consumer fraud statutes.[18] The appeals court stated that a plaintiff “must do more than provide their own ipse dixit, citation to a similar case, and a generic assessment of consumer fraud statutes, to justify grouping.”[19]

Unjust Enrichment

The appeals court then turned its attention to the plaintiffs’ unjust enrichment claim. Most of the recent Third Circuit class certification case law has focused on the ascertainability requirement – whether individuals fitting the class definition may be identified without resort to mini-trials.[20] In Grandalski, the district court ruled that the plaintiffs had again failed to clear the ascertainability hurdle, holding that the proposed class definition required an implicit finding of fact of harm (i.e., a finding that each class member had paid an excessive bill), which could only be resolved with an individual inquiry. The appeals court concluded that the correct basis for the trial court’s concern was not ascertainability but rather the predominance requirement of Rule 23(b)(3).[21] It explained that “predominance and ascertainability are separate issues” – the ascertainability inquiry “focused on whether objective records could readily identify class members,” whereas predominance focused on the nature of the evidence (individual or common) required to prove the substantive claim.[22]

Citing evidence from the defendant’s expert that there were several factual scenarios that could lead to ostensible overbilling of a patient but not necessarily unjust or fraudulent billing, the Third Circuit held that individual inquiries would be required to determine whether an alleged overbilling constituted unjust enrichment.[23] Such specific evidence was incompatible with representative litigation”[24] and class certification was therefore properly denied.[25]

Impact on Future Cases

The decision is important on several fronts. Allied with last year’s decision in Maniscalco, Grandalski more or less sounds the death knell for attempts to certify traditional consumer fraud cases as nationwide class actions. The “most significant relationship” test of the Restatement mandates the application of the fifty states’ laws, and that necessity precludes class treatment on a nationwide scale. Grandalski also reaffirms the onerous burden confronting plaintiffs seeking to circumventing choice of law problems with “grouping” arguments. The decision also demonstrates that while in theory the class certification inquiry is the same for both litigation and settlement classes, in practice they can be very different.

On ascertainability, the decision may reflect a subtle effort on the part of the Court to redirect litigants towards the predominance inquiry as the prism through which individual issues should be examined. However, it also reaffirms the validity of the ascertainability rulings in prior cases.

With respect to unjust enrichment, the Grandalski decision does not address an issue that is percolating currently in the lower federal courts – whether the unjust enrichment laws of the various states are similar enough to permit nationwide certification.[26] That question must await resolution in a future appeal. Instead, the Third Circuit focused on one individual issue, an issue it considered important enough on its own to defeat predominance. This finding is, in itself, significant. The Court quoted the Supreme Court’s recent Wal-Mart decision for the proposition that “a common contention … must be of such a nature that … determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in a single stroke.”[27] The predominance requirement clearly retains real teeth in the Third Circuit.

Added to the other recent Third Circuit decisions on class certification, Grandalski affords defendants cause for continued but cautious optimism that class actions will remain, as the Supreme Court described them some 35 years ago, “the exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.”[28]


[1] See, e.g., Hayes v. Wal-Mart Stores, Inc., 725 F.3d 349 (3d Cir. 2013); Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013); Marcus v. BMW of N. Am., LLC, 687 F.3d 583 (3d Cir. 2012).

[2] See, e.g., Maniscalco v. Brother Int’l (USA) Corp., 709 F.3d 202 (3d Cir. 2013); Nafar v. Hollywood Tanning Sys., Inc., 339 Fed. Appx. 216 (3d Cir. 2009); see also P.V. v. Camp Jaycee, 197 N.J. 132 (2008) (adopting the “most significant relationship” test of the Restatement (Second) of Conflict of Laws in tort cases).

[3]Grandalski v. Quest Diagnostics, Inc., No. 13-4329 (slip op.) (3d Cir. Sept. 11, 2014).

[4] Id. at 4.

[5] Id. at 5.

[6] Id. at 4.

[7] Id. at 5.

[8] Id. at 8-9 (citing Sullivan v. DB Investments, Inc., 667 F.3d 273, 309 (3d Cir. 2011)).

[9] Id. at 10 (citing In re LifeUSA Holding Inc., 242 F.3d 136, 147 (3d Cir. 2001)).

[10] 709 F.3d 202.

[11]Grandalski, slip op at 11-12 (citing Maniscalco, 709 F.2d at 208).

[12] Id. at 13-15.

[13] Id. at 14.

[14] Id. at 15. The Section 6 principles are (1) the interests of interstate comity, (2) the interests of the parties, (3) the interests underlying the field of tort law, (4) the interests of judicial administration, and (5) the competing interests of the states. Id. (citing Maniscalco, 709 F.2d at 207).

[15] Id. at 15.

[16] Id. at 15-17 (citing Sullivan, 667 F.3d at 301, and In re Prudential of Am. Sales Pract. Litig., 148 F.3d 283, 315 (3d Cir. 1998)).

[17] Id. at 17 (citing Klay v. Humana, Inc., 382 F.3d 1241, 1262 (11th Cir. 2004); Walsh v. Ford Motor Co., 807 F.2d 1000, 1017 (D.C. Cir. 1986)).

[18] Id. at 16.

[19] Id. at 17.

[20]In Marcus and then again in Carrera, the Third Circuit held that a class action is inappropriate if (a) “class members are impossible to identify without extensive and individualized fact-finding or ‘mini-trials,’” or (b) class members cannot be identified in a reliable and administratively feasible fashion, through a method that permits a defendant to challenge the evidence. Applying these principles in consumer fraud cases, the Third Circuit reversed certification where class membership was predicated upon potentially self-serving affidavits from putative class members as to their purchases of the defendants’ products. Marcus, 687 F.3d at 593-94; Carrera, 727 F.3d at 308-09. The Carrera court further rejected the use of customer membership cards or online sales records absent evidence that they were reliable methods of establishing class member purchases. Id. at 309. The Third Circuit in Hayes vacated a district court order certifying a consumer fraud class, remanding the case for additional findings on the ascertainability issue, warning that certification would fail “if the only proof of class membership is the say-so of putative class members or if ascertaining the class requires extensive and individualized fact-finding.” 725 F.3d at 356.

[21] Grandalski, slip op. at 18-21.

[22] Id. at 19-20.

[23] Ibid.

[24] Id. at 20 (quoting Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011)).

[25] Id.

[26]Several courts in the District of New Jersey have held that there is no significant conflict. See, e.g., Snyder v. Farnam Cos., Inc., 792 F.Supp.2d 712, 723 (D.N.J. 2011); Agostino v. Quest Diagnostics, 256 F.R.D. 437, 464 (D.N.J. 2009). Courts in other districts have reached the opposite conclusion. See, e.g., True v. Conagra Foods, Inc., 2011 WL 176037, at *9 (W.D. Mo. Jan 4, 2011); Tyler v. Alltel Corp., 256 F.R.D. 415, 422 (E.D. Ark. 2010). The courts in other districts have the better of the argument. As one court explained, “unjust enrichment is a tricky type of claim that can have varying interpretations even by courts within the same state, let alone among the fifty states.” In re Sears Roebuck & Co., Tools Mktg. & Sales Pract. Litig., 2006 WL 3754823, at *1 n.3 (N.D. Ill. Dec. 18, 2006).

[27] Id. at 20 (quoting Wal-Mart, 131 S.Ct. at 2551).

[28] Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979).

Copyright © 2024 Clark Michie LLPConditions of Use