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Manufacturer’s Corner: A Word on Consumer Class Actions

This is not a litigation column, but I’m a trial attorney, so litigation is always on my mind.  I’ve been hearing a lot of chatter lately about consumer class actions.  Specifically: what must a putative consumer class do to show that the class members are ascertainable – that is, that the court and the lawyers and the class members can figure out who is in the class and who is not.

This has been a big issue in the “all natural” food class actions, where a putative consumer class contends its members were misled by “all natural” food labeling when the food was, I don’t know, something else I guess, “two-thirds natural.”  When you’re dealing with a relatively minor purchase like food, it’s not likely that the putative class members will have kept the receipt or the packaging, so how do you determine who is a class member and who is not, without having the class action disintegrate into a series of mini-trials on that question?

This issue has led to a lot of courts declining to certify consumer class actions.  That strikes many people as unfair.  Even with my biases (which should be obvious given the title of the column you’re reading), I see the emotional appeal in that position: why should we stop a class action simply because it pertains to minor purchases?  Isn’t that what class actions were intended to deal with?

Yes and no.  The fact is, class actions were not intended to be the solution to every case involving many parties, and consumer class members have alternate relief available to them.  In my mind, courts are wise to limit the class action vehicle to the purposes for which it was intended, and that means saying “no” to many putative classes for which class membership cannot readily be ascertained through objective criteria.  Otherwise, the class action vehicle becomes inefficient, and efficiency – not access to courts – was the goal behind creation of the class action vehicle.

Let’s start with the myth that refusing certification in consumer class actions based on minor purchases prohibits access to the courts.  That is patently untrue.  Any given class member can seek redress for his or her individual harm in his or her own lawsuit.  A common objection to this argument is that the costs of pursuing such relief outweigh the likely recovery, but that is rarely the case, if ever.  For instance, the federal Magnuson-Moss Consumer Warranty Act would allow consumers proceeding on a breach of warranty theory to recover their attorneys’ fees upon a showing of liability and damages.

Similarly, the issue of ascertainability, while present in all class actions, is only a major issue in certain types of class actions that require the putative class to show that common questions predominate over individualized inquiries.  This predominance inquiry is what has truly proven fatal to the putative “all natural” consumer classes – if there is no easy way to determine the identity of class memberships, then making that determination will overwhelm the class action.  But, that showing is not required in all class actions, so even alternative forms of class action can provide access to courts for putative consumer classes.

Now, the other side of the issue is what harm is done by allowing consumer classes like these to proceed?  The answer is “quite a lot.”  As a practical matter, when ascertainability is a complicated issue, that will mean one of two things.  One, it could mean that the defendant has to invest substantial resources in investigating claims of class membership rather than investigating and briefing substantive issues regarding liability and damages.[1]  Alternatively, the issue gets glossed over and the defendant is left with a substantial possibility that it is litigating against a plaintiff class that includes people who are in no manner entitled to a remedy.  That is unfair.

As the case law on this issue continues to develop, it is likely you will hear more about this issue.  As the voices arguing that the ascertainability requirement is unfair grow louder, keep in mind that adhering to the constitutional underpinnings of the ascertainability requirement does not keep consumers out of court, but it does give potential class defendants some guarantees of a fair and efficient process.

[1] And this is just from the defendant’s side.  The named plaintiffs will also have to identify class members to give them notice.  And both sides need to worry about the possibility of others bringing different lawsuits, contending that they are not members of the putative class.