Law360, New York (June 30, 2016, 4:42 PM ET) —

The Eighth Circuit’s recent ruling in Sandusky Wellness Center LLC v. Medtox Scientific Inc. on ascertainability deepened a circuit split on one of the most important and challenging class certification issues. Until theU.S. Supreme Court resolves the split, the legal standard for ascertainability will remain a crucial and at times dispositive issue. Along with the Consumer Financial Protection Bureau’s continued efforts to eliminate class action waivers in arbitration agreements, this decision reflects a legal trend favoring class actions and hence increased litigation risk for companies.

Ascertainability: The Basics

Courts generally agree that a putative class should not be certified unless its membership is ascertainable. In other words, Rule 23 of the Federal Rules of Civil Procedure contains an implicit threshold requirement that members of a proposed class be readily identifiable. Courts disagree, however, on what is required to prove ascertainability. Since the Third Circuit’s decisions in Marcus v. BMW, Hayes v. Wal-Mart Stores Inc., and Carrera v. Bayer Corp., circuits have split on the proper ascertainability standard.

The Third Circuit’s “heightened” standard requires 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.” On the other hand, the minority of circuits, led by the Seventh Circuit, hold that the “administrative” concerns of ascertainability are properly addressed under a careful application of Rule 23(a) and especially Rule 23(b)(3), and ascertainability only requires an objectively defined class.

Ascertainability is often case dispositive to a class claim. If a court requires plaintiff’s counsel to prove as part of class certification that members of the class can be identified without inordinate amount of inquiry into individual circumstances, then many class actions that are destined to fail can be ended at that early point. However, if a court determines that the process of identifying members of the class is a task that can be deferred until a later point in the litigation, then classes can be certified. Certification applies heavy pressure on defendants to settle regardless of whether the class is ultimately viable.

Background of Sandusky

In Sandusky, the defendant toxicology lab, Medtox Scientific Inc. contacted pediatricians, family practitioners, health departments, and child-focused organizations about its lead testing capabilities. Using a directory from a health insurance company, Medtox transmitted a single-page fax to 3,256 numbers within a nine-day period. One of those numbers belonged to the plaintiff, a chiropractic center, Sandusky Wellness Center LLC.

Sandusky’s name was not specifically on the contact list, but Dr. Bruce Montgomery — a family practitioner who worked one day a week at the center — was on the contact list. Montgomery had provided Sandusky’s fax number to the health insurance company, which gave it to Medtox.

Sandusky filed suit under the Telephone Consumer Protection Act, which prohibits the use of any telephone facsimile machine to send to another facsimile machine an unsolicited advertisement unless certain exceptions apply. Sandusky sought to certify a class of all persons who were sent faxes regarding lead testing services by or on behalf of the defendant. The district court denied class certification, holding that the class was “not ascertainable, because it does not objectively establish who is included in the class.”

Although fax logs would show the numbers that received the faxes, the district court concluded that the class was not ascertainable because of the need to conduct individualized inquiries to determine which class members were injured under the TCPA. Sandusky then appealed to the Eighth Circuit.

Eighth Circuit Decision

On appeal, Medtox argued that there was no way to objectively ascertain the class because it includes all persons who “were sent” the faxes, which Medtox claimed could apply to multiple persons (e.g., the subscriber to the fax number, the owner of the fax machine, or a user disrupted by the fax). The Eighth Circuit however focused on the language of the TCPA, which prohibits sending an unsolicited fax advertisement to a “recipient.” The court concluded that a “recipient” is “the person or entity that gets the fax,” and “[t]he best objective indicator of the ‘recipient’ of a fax is the person who subscribes to the fax number.” The Eighth Circuit determined that “fax logs showing the numbers that received each fax are objective criteria that make the recipient clearly ascertainable.”

Most importantly, the opinion defined the ascertainability standard within the Eighth Circuit, requiring only that the class be defined in reference to objective criteria. By accepting such a definition, the Eighth Circuit aligned itself with the minority of courts requiring a less rigorous analysis.

Split Among the Circuits

The Eighth Circuit joined the minority of circuits requiring a less rigorous ascertainability standard. The chart below defines the current state of this circuit split.

Table 1
Moving Forward

To date, the Fifth, Ninth, Tenth and D.C. Circuits have remained silent on the issue. Given the difference of opinion among the courts of appeals on this issue in the last few years, the Supreme Court will have to step in to have the final say, most likely after a new justice is confirmed to replace the late Justice Antonin Scalia. The nation’s highest court earlier this year declined review of the Seventh Circuit’s decision in Mullins v. Direct Digital LLC, which similarly adopted the less rigorous ascertainability standard.

With lack of clarity among the circuits, class action practitioners are faced with varying standards and levels of scrutiny based on the circuit in which their cases lie. Decisions such as Sandusky lower the bar for plaintiffs seeking class certification and provide more ammunition for plaintiffs’ counsel seeking to bring nationwide class actions. Defense counsel will seek to leverage cases such as Carrera by arguing that putative classes cannot be defined without individual “mini-trials,” thus destroying the core precepts of Rule 23.