U.S. SC declines to wade into dispute over heightened standard in federal class actions

By Jessica Karmasek | Mar 16, 2016

The U.S. Supreme Court building in Washington, D.C.  

WASHINGTON (Legal Newsline) - The U.S. Supreme Court recently declined a request for review by a company arguing in favor of a “heightened” standard for ascertaining class members in federal class actions.

The nation’s high court denied Direct Digital LLC’s petition for a writ of certiorari, which was filed in October.

The company, which makes Instaflex Joint Support, a product aimed at relieving joint discomfort, argued the case was an important one because of an existing circuit split.

The question presented to the Supreme Court in Direct Digital LLC v. Mullins: “Whether a court may certify a class under Federal Rule of Civil Procedure 23(b)(3) where the plaintiff fails to make any showing of a reliable and administratively feasible means for ascertaining class membership.”

“Plaintiffs seek to certify classes whose claimed membership would be determined based on nothing more than a consumer’s vague recollections,” Direct Digital wrote in its petition. “In the absence of proof of purchase or other records showing who purchased what product and when, plaintiffs suggest that class membership can be established through self-identifying affidavits -- simple boilerplate recitations, untested by cross-examination, that claim a place in the class. And inevitably, of course, this method carries not only the risk of foggy memory, but can also tempt outright fraud.

“If such claims were brought individually, a defendant would have a due process right to test whether the plaintiff actually purchased the defendant’s product. That fundamental right cannot be compromised for the convenience of class plaintiffs and their counsel.”

The Supreme Court, in its Feb. 29 order list, did not provide an explanation for its decision, as is customary.

However, Justice Antonin Scalia’s death last month may have played a part in Mullins.

The 79-year-old justice was found dead of natural causes at a luxury hunting resort in West Texas Feb. 13. He served on the high court for nearly 30 years and had a significant impact on the court’s rulings in class action cases.

As Michael R. Carroll, a partner at the New Jersey office of Ballard Spahr LLP, recently noted, in four cases with five-justice majorities, Scalia wrote for a divided court that upheld contractual waivers of class arbitration; questioned class-wide damages models; and required a strict interpretation of what constitutes common questions of law and fact sufficient to maintain a class action under Rule 23.

Rule 23 governs the procedure and conduct of class action suits brought in federal courts.

Carroll said it may be that the remaining eight justices don’t want to take up cases that are likely to closely divide the court until Scalia’s replacement is confirmed.

The White House confirmed that President Barack Obama plans to nominate Merrick Garland, chief judge of the U.S. Court of Appeals for the District of Columbia Circuit. Obama planned to make his announcement Wednesday.

In Mullins, plaintiff Vince Mullins sued Direct Digital for fraudulently representing that its product relieves joint discomfort. He alleges that statements on the Instaflex labels and marketing materials -- “relieve discomfort,” “improve flexibility,” “increase mobility,” “support cartilage repair,” “scientifically formulated” and “clinically tested for maximum effectiveness” -- are fraudulent because the primary ingredient in the supplement, glucosamine sulfate, is nothing more than a sugar pill and there is no scientific support for the claims.

Mullins asserts that Direct Digital is liable for consumer fraud under the Illinois Consumer Fraud and Deceptive Business Practices Act and similar consumer protection laws in nine other states.

Mullins moved to certify a class of consumers “who purchased Instaflex within the applicable statute of limitations of the respective Class States for personal use until the date notice is disseminated.” The district court certified the class under Rule 23(b)(3).

Rule 23(b)(3), in class action law, requires that judges not certify or authorize a class unless he or she finds that common issues of law or fact predominate.

Direct Digital filed a petition for leave to appeal under Rule 23(f) arguing that the district court abused its discretion in certifying the class without first finding that the class was “ascertainable.”

Direct Digital also argued that the district court erred by concluding that the efficacy of a health product can qualify as a “common” question under Rule 23(a)(2).

The U.S. Court of Appeals for the Seventh Circuit, in its July 28 opinion, affirmed class certification, concluding that the company’s ascertainability concerns are outweighed.

Such a heightened ascertainability requirement “upsets the balance,” the Seventh Circuit ruled.

“In effect, it gives one factor in the balance absolute priority, with the effect of barring class actions where class treatment is often most needed: in cases involving relatively low-cost goods or services, where consumers are unlikely to have documentary proof of purchase,” the panel wrote.

Direct Digital argued in its petition to the Supreme Court that the Seventh Circuit, in its ruling, didn’t require Mullins to make any showing that the class could actually be ascertained in a feasible and reliable manner.

“The court explicitly acknowledged the other circuits that would require such an ascertainability showing, but chose to reject their approach,” the company wrote.

“The Seventh Circuit’s decision leaves Petitioner Direct Digital facing potentially huge damages from the certified class, with no assurances that it will ever be able to test whether any of the would-be class members actually purchased Instaflex.

“The only winner, of course, is not the class members -- who stand to recover little, if they can be identified at all -- but class counsel -- who has now been handed extraordinary leverage to negotiate a settlement and its fee.”

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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