On Jan. 3, in Briseno v. Conagra Foods, Inc., Case No. 15-55727, the Ninth Circuit Court of Appeals held that Fed. R. Civ. P. 23 does not require class representatives to demonstrate that there is an “administratively feasible” means of identifying absent class members in order to certify a class. In rejecting the “administrative feasibility” requirement, the Ninth Circuit joins the Seventh Circuit, which has come to the same conclusion. (See some of our recent coverage on this issue here, here and here).
The “administrative feasibility” test, also referred to as part of “ascertainability,” asks whether there is an administratively feasible way to identify class members or if costly individualized fact-finding or mini-trials will be required to prove class membership. If too much individual fact-finding is needed, then there is not an administratively feasible way to ascertain class members. Circuit courts, such as the Third and Eleventh, have applied this test as a means of ensuring that class issues can be adjudicated efficiently, ensuring notice to class members and protecting the defendant and honest claimants from fraudulent claims.
In Briseno, however, the court rejected both the textual basis of the test and the concerns on which it is based. First, the Ninth Circuit held that the test is incompatible with the language of Rule 23. Citing canons of construction, the court stated that Rule 23(a) does not reference ascertainability and applying it would render the manageability test under Rule 23(b)(3)(D) “largely superfluous.”
With respect to the concerns underlying ascertainability, the court echoed the Seventh Circuit’s 2015 decision in Mullins v. Direct Digital, LLC, and stated that “mere” manageability concerns should not prevent class certification because a court must consider “other methods” under Rule 23(b)(3) for resolving the controversy, and administrative feasibility should not be determinative if there is no “realistic alternative to class treatment.” The court also rejected the lack of notice to absent class members that cannot be identified by pointing out that actual notice is not necessary – only the “best notice practicable” is required under Rule 23. The court also dismissed the risk of dilution by fraud as “low, perhaps non-existent.”
Perhaps Briseno’s most interesting passage is how it addressed the defendant’s due process concerns. It is well-settled that a class action defendant has a right to raise individual defenses, and an action cannot be certified in a way that eliminates this right. As the Supreme Court stated in Dukes, “[A] class cannot be certified on the premise that [a defendant] will not be entitled to litigate its . . . defenses to individual claims.” The Briseno court’s main rebuttal to this was that a court can create a verification procedure to allow a defendant to challenge claims of absent class members if and when they come forward. Yet the forces that undermine litigation of low-dollar claims would seem to cut against reviewing absent class member claims, particularly at the class administration stage after a judgment or settlement. Sensing this argument, the court quoted Mullins and stated that “there is no due process right to a cost-effective procedure for challenging every individual claim to class membership.” The court also noted that identification of class members (or the lack thereof) would not affect the aggregate liability of the defendant because the plaintiffs’ damages model was not based on the number of class members. Instead, damages were based on the “price premium” attributable to the allegedly false statement, which would then be multiplied by the number of units sold. Thus, the court stated that aggregate liability is determinable, even if “the identity of all class members is not.”
It is clear that the Ninth Circuit, like the Seventh Circuit in Mullins, was heavily influenced by the goal of Rule 23, which was created to facilitate low-value claims that may be hard to bring on an individual basis. And both courts believe that imposing an “administrative feasibility” requirement would frustrate this goal. But whether these courts have adequately addressed the concerns that administrative feasibility protects, due process in particular, will be ultimately resolved by the Supreme Court. Yet, early in 2016, the Supreme Court denied certiorari review in Mullins v. Direct Digital, LLC. For the time being, defendants facing putative class actions should be cautious in advancing administrative feasibility or ascertainability, and advance such arguments within the text of Rule 23 itself (e.g., manageability and superiority).